UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act File Number 811-04550
THE MAINSTAY FUNDS
(Exact name of Registrant as specified in charter)
51 Madison Avenue, New York, NY 10010
(Address of principal executive offices) (Zip code)
J. Kevin Gao, Esq.
30 Hudson Street
Jersey City, New Jersey 07302
(Name and address of agent for service)
Registrant’s telephone number, including area code: (212) 576-7000
Date of fiscal year end: October 31
Date of reporting period: October 31, 2018
FORM N-CSR
Item 1. | Reports to Stockholders. |
MainStay MacKay Unconstrained Bond Fund (Formerly known as MainStay Unconstrained Bond Fund)
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception Date | One Year or Since | Five Years or Since | Ten Years | Gross Expense Ratio3 | ||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/1997 | | –4.26 0.25 | %
| | 1.15 2.08 | %
| | 6.30 6.79 | %
| | 1.13 1.13 | %
| |||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –4.28 0.23 | | | 1.13 2.07 | | | 6.19 6.68 | | | 1.15 1.15 |
| |||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 2/28/1997 | | | –5.38 –0.52 | | | 0.95 1.31 | | | 5.89 5.89 | | | 1.90 1.90 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within | With sales charges Excluding sales charges | | 9/1/1998 | | | –1.49 –0.52 | | | 1.31 1.31 | | | 5.88 5.88 | | | 1.90 1.90 |
| |||||||
Class I Shares | No Sales Charge | 1/2/2004 | 0.51 | 2.34 | 7.06 | 0.88 | ||||||||||||||||||
Class R2 Shares | No Sales Charge | 2/28/2014 | 0.16 | 1.61 | N/A | 1.23 | ||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | –0.09 | 5.15 | N/A | 1.48 | ||||||||||||||||||
Class R6 Shares | No Sales Charge | 2/28/2018 | 0.54 | 0.54 | N/A | 0.72 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
Bloomberg Barclays U.S. Aggregate Bond Index4 | –2.05 | % | 1.83 | % | 3.94 | % | ||||||
ICE BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index5 | 1.85 | 0.79 | 0.70 | |||||||||
Morningstar Nontraditional Bond Category Average6 | 0.31 | 1.91 | 5.13 |
4. | The Bloomberg Barclays U.S. Aggregate Bond Index is the Fund’s primary broad-based securities market index for comparison purposes. The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Fund has selected the ICE BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index as a secondary benchmark. The ICE BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index represents the |
London InterBank Offered Rate (“LIBOR”) with a constant 3-month average maturity. LIBOR is a composite of interest rates at which banks borrow from one another in the London market, and it is a widely used benchmark for short-term interest rates. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Fund has selected the Morningstar Nontraditional Bond Category Average as an additional benchmark. The Morningstar Nontraditional Bond Category Average contains funds that pursue strategies divergent in one or more ways from conventional practice in the broader bond-fund universe. Morningstar category averages are equal-weighted returns based on constituents of the category at the end of the period. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Unconstrained Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Unconstrained Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 10/31/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2,3 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,004.10 | $ | 6.42 | $ | 1,018.80 | $ | 6.46 | 1.27% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,003.90 | $ | 6.47 | $ | 1,018.75 | $ | 6.51 | 1.28% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,000.20 | $ | 10.23 | $ | 1,014.97 | $ | 10.31 | 2.03% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,000.20 | $ | 10.23 | $ | 1,014.97 | $ | 10.31 | 2.03% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,005.40 | $ | 5.16 | $ | 1,020.06 | $ | 5.19 | 1.02% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,003.60 | $ | 6.77 | $ | 1,018.45 | $ | 6.82 | 1.34% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,001.20 | $ | 8.12 | $ | 1,017.09 | $ | 8.19 | 1.61% | |||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 1,006.20 | $ | 4.25 | $ | 1,020.97 | $ | 4.28 | 0.84% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
3. | Expenses are inclusive of dividends and interest on investments sold short. |
7 |
Portfolio Composition as of October 31, 2018 (Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories. The Fund’s portfolio is subject to change.
‡ Less than one-tenth of a percent.
Top Ten Holdings or Issuers Held as of October 31, 2018 (excluding short-term investments) (Unaudited)
1. | Morgan Stanley, 3.125%–7.30%, due 5/13/19–1/20/27 |
2. | Bank of America Corp., 3.004%–8.57%, due 6/17/19–1/29/37 |
3. | Goldman Sachs Group, Inc., 2.35%–5.25%, due 7/27/21–5/15/26 |
4. | Citigroup, Inc., 2.35%–6.30%, due 8/2/21–7/1/26 |
5. | Lennar Corp., 4.50%–8.375%, due 6/15/19–12/15/21 |
6. | Kreditanstalt Fuer Wiederaufbau, 1.50%, due 2/6/19 |
7. | Microsoft Corp., 1.10%–1.85%, due 8/8/19–2/6/20 |
8. | Quikrete Holdings, Inc., 5.052%, due 11/15/23 |
9. | Marathon Petroleum Corp., 5.125%, due 4/1/24–12/15/26 |
10. | Petrobras Global Finance B.V., 7.375%, due 1/17/27 |
8 | MainStay MacKay Unconstrained Bond Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, Louis N. Cohen, CFA,1 Joseph Cantwell, Shu-Yang Tan, CFA, Matt Jacob, Stephen R. Cianci, CFA, and Neil Moriarty III, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Unconstrained Bond Fund perform relative to its benchmarks and peer group during the 12 months ended October 31, 2018?
For the 12 months ended October 31, 2018, Class I shares of MainStay MacKay Unconstrained Bond Fund returned 0.51%, outperforming the –2.05% return of the Fund’s primary benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, and underperforming the 1.85% return of the Fund’s secondary benchmark, the ICE BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Constant Maturity Index. Over the same period, Class I shares outperformed the 0.31% return of the Morningstar Nontraditional Bond Category Average.2
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s outperformance relative to the Bloomberg Barclays U.S. Aggregate Bond Index, was driven primarily by an overweight allocation to credit, such as investment-grade corporate bonds, high-yield corporate bonds and bank loans, which offered a healthy yield advantage to comparable-duration3 Treasury instruments. The yield advantage offset the downside effects of spread4-widening in the credit sectors. Additionally, the Fund’s shorter duration profile was beneficial as Treasury yields rose across the curve, more so on the front end.
The most significant factor that influenced the fixed-income markets during the reporting period was the Federal Reserve’s interest rate policy. U.S. Treasury yields rose across the yield curve,5 though less so in longer maturities, in response to the policy committee of the Federal Reserve raising its federal funds target rate four times during the period to forestall any potential of the economy overheating. Additionally, ballooning Treasury issuance to fund the budget deficit also influenced higher rates. More modest increases in the long end reflect tepid inflation, trade policy in flux and the long end’s pedigree as a refuge from pockets of regional tension. The Tax and Jobs Act was signed into law on December 22, 2017, creating the most significant tax overhaul in three decades. The recent tax cuts have supported earnings growth in 2018, but we question the sustainability of earnings as the one-time boost from tax cuts begins to fade.
The stock market tempered its momentum as investors questioned the durability of the current business cycle and the ability
of corporations to absorb headwinds such as a weaker dollar and higher financing costs. Swayed by similar effects, corporate bond spreads widened.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
We used Treasury futures and swaps during the period, which are an integral part of the Fund’s duration management. With the Federal Reserve having raised interest rates four times during the period, the use of futures and swaps contributed positively to Fund performance. (Contributions take weightings and total returns into account.)
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay Unconstrained Bond Fund was renamed MainStay MacKay Unconstrained Bond Fund. For more information on this change, please refer to the supplement dated December 15, 2017. On February 28, 2018, Joseph Cantwell, Shu-Yang Tan and Matt Jacob were added as portfolio managers of the Fund and Michael Kimble was removed. Effective October 18, 2018, Stephen Cianci and Neil Moriarty were added as portfolio managers of the Fund. For more information on this change, refer to the supplement dated October 18, 2018.
What was the Fund’s duration strategy during the reporting period?
In order to reduce the Fund’s sensitivity to interest rates, we maintained a low duration relative to the Bloomberg Barclays U.S. Aggregate Bond Index. At the end of the reporting period, the duration was 1.1 years.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, the Fund’s position in bank loans was the biggest contributor to relative performance. The Fund’s position in high-yield bonds also performed well on a relative basis as the higher coupons dampened any interest rate
1. | Louis Cohen will serve as a portfolio manager of the Fund until on or about December 31, 2018. |
2. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
3. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
4. | The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time. The term “credit spread” typically refers to the difference in yield between corporate or municipal bonds (or a specific category of these bonds) and comparable U.S. Treasury issues. |
5. | The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting. |
9 |
sensitivity. Among the Fund’s credit investments, industrials contributed positively to relative performance, while financials detracted. The Fund’s small position in emerging-market credit also was a slight detractor from relative performance.
Coupled with an overweight to credit was an underweight to sectors of the market that were more interest rate sensitive, such as Treasury securities and mortgage-backed securities. Both of these sectors were negatively impacted by higher rates, so the Fund’s underweight was beneficial to relative performance during the reporting period.
What were some of the Fund’s largest purchases and sales during the reporting period?
During the reporting period, we initiated a position in Crown Castle Tower secured bonds. The bonds are secured by cell towers and were attractively priced with an A-rating.6 Conversely, we sold the unsecured Crown Castle paper. We wanted to maintain exposure to the credit but also wanted to improve the overall quality of the Fund.
The Fund also initiated a position in a AAA-rated7 commercial mortgage-backed new single property issue that offered an attractive pricing opportunity to purchase a securitized product while diversifying the Fund’s corporate holdings.
We sold the Fund’s position in beverage company Anheuser Busch based on current valuations relative to its peers of the same credit quality.
How did the Fund’s sector weightings change during the reporting period?
As credit spreads continued to narrow during the reporting period, we trimmed the Fund’s weighting to high-yield bonds and, to a lesser degree, bank loans. During the reporting period, the Fund selectively added to investment-grade corporate bonds and, to a lesser degree, asset-backed securities and commercial mortgage-backed securities.
How was the Fund positioned at the end of the reporting period?
Relative to the Bloomberg Barclays U.S. Aggregate Bond Index, the Fund ended the period overweight in high-yield credit, bank loans and investment-grade credit. Offsetting these sector overweights were underweights in U.S. Treasury securities and mortgage-backed securities.
6. | An obligation rated ‘A’ by Standard & Poors’ (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. In the opinion of S&P, however, the obligor’s capacity to meet its financial commitment on the obligation is still strong. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
7. | An obligation rated ‘AAA’ has the highest rating assigned by S&P, and in the opinion of S&P, the obligor’s capacity to meet its financial commitment on the obligation is extremely strong. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay MacKay Unconstrained Bond Fund |
Portfolio of Investments October 31, 2018
Principal Amount | Value | |||||||
Long-Term Bonds 99.8%† Asset-Backed Securities 0.8% |
| |||||||
Auto Floor Plan Asset-Backed Securities 0.4% |
| |||||||
Navistar Financial Dealer Note Master Owner Trust II | $ | 3,980,000 | $ | 3,983,049 | ||||
|
| |||||||
Home Equity 0.0%‡ |
| |||||||
First NLC Trust | 323,838 | 196,630 | ||||||
JPMorgan Mortgage Acquisition Trust | 116,317 | 81,300 | ||||||
MASTR Asset-Backed Securities Trust | 86,860 | 40,914 | ||||||
Morgan Stanley ABS Capital I Trust | 86,943 | 40,452 | ||||||
|
| |||||||
359,296 | ||||||||
|
| |||||||
Other Asset-Backed Securities 0.4% |
| |||||||
Dell Equipment Finance Trust | 4,040,000 | 4,039,597 | ||||||
|
| |||||||
Student Loans 0.0%‡ |
| |||||||
KeyCorp Student Loan Trust | 378,654 | 377,472 | ||||||
|
| |||||||
Total Asset-Backed Securities | 8,759,414 | |||||||
|
| |||||||
Corporate Bonds 80.1% |
| |||||||
Advertising 0.2% |
| |||||||
Lamar Media Corp. | 2,695,000 | 2,698,369 | ||||||
|
| |||||||
Aerospace & Defense 0.8% |
| |||||||
Moog, Inc. | 5,505,000 | 5,491,237 |
Principal Amount | Value | |||||||
Aerospace & Defense (continued) |
| |||||||
Rockwell Collins, Inc. | $ | 3,350,000 | $ | 3,148,280 | ||||
|
| |||||||
8,639,517 | ||||||||
|
| |||||||
Agriculture 0.7% |
| |||||||
Philip Morris International, Inc. | 8,215,000 | 8,186,706 | ||||||
|
| |||||||
Airlines 1.5% |
| |||||||
Continental Airlines, Inc. | ||||||||
Series 2007-1, Class A | 2,660,261 | 2,785,027 | ||||||
Series 2005-ERJ1 | 208,077 | 219,001 | ||||||
Delta Air Lines, Inc. | ||||||||
Series 2001-1, Class A | 603,002 | 607,525 | ||||||
Series 2007-1, Class A | 1,309,495 | 1,422,766 | ||||||
U.S. Airways Group, Inc. | ||||||||
Series 2012-1, Class A | 1,893,676 | 2,026,233 | ||||||
Series 2010-1, Class A | 5,287,018 | 5,639,662 | ||||||
United Airlines, Inc. | 4,444,536 | 4,455,159 | ||||||
|
| |||||||
17,155,373 | ||||||||
|
| |||||||
Auto Manufacturers 2.6% |
| |||||||
Daimler Finance North America LLC | 6,950,000 | 6,860,175 | ||||||
Ford Holdings LLC | 93,000 | 112,005 | ||||||
Ford Motor Co. |
| |||||||
7.45%, due 7/16/31 | 10,000 | 10,524 | ||||||
8.90%, due 1/15/32 | 3,009,000 | 3,508,487 | ||||||
Ford Motor Credit Co. LLC | 3,345,000 | 3,295,986 | ||||||
General Motors Co. | 2,620,000 | 2,313,062 | ||||||
General Motors Financial Co., Inc. | 8,590,000 | 8,361,975 | ||||||
Toyota Motor Credit Corp. | 5,700,000 | 5,613,547 | ||||||
|
| |||||||
30,075,761 | ||||||||
|
| |||||||
Auto Parts & Equipment 0.3% |
| |||||||
LKQ European Holdings B.V. | EUR | 3,005,000 | 3,350,348 | |||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Banks 20.3% |
| |||||||
Bank of America Corp. | ||||||||
3.004%, due 12/20/23 (c) | $ | 7,718,000 | $ | 7,426,253 | ||||
3.30%, due 1/11/23 | 510,000 | 498,585 | ||||||
3.499%, due 5/17/22 (c) | 5,150,000 | 5,125,657 | ||||||
4.25%, due 10/22/26 | 7,260,000 | 7,056,829 | ||||||
5.125%, due 6/17/19 (c)(d) | 4,990,000 | 4,977,525 | ||||||
6.11%, due 1/29/37 | 2,807,000 | 3,138,670 | ||||||
6.30%, due 3/10/26 (c)(d)(e) | 3,570,000 | 3,761,888 | ||||||
8.57%, due 11/15/24 | 1,645,000 | 1,998,839 | ||||||
Bank of New York Mellon Corp. (c) | ||||||||
2.661%, due 5/16/23 | 4,660,000 | 4,492,054 | ||||||
4.625%, due 9/20/26 (d) | 5,050,000 | 4,765,938 | ||||||
Barclays Bank PLC | ||||||||
5.14%, due 10/14/20 | 8,037,000 | 8,217,142 | ||||||
Series Reg S | GBP | 449,000 | 675,609 | |||||
BB&T Corp. | $ | 6,370,000 | 6,202,151 | |||||
Capital One Financial Corp. | ||||||||
4.20%, due 10/29/25 | 800,000 | 772,012 | ||||||
5.55%, due 6/1/20 (c)(d) | 1,535,000 | 1,550,350 | ||||||
Citigroup, Inc. | ||||||||
2.35%, due 8/2/21 (e) | 5,000,000 | 4,832,950 | ||||||
3.576% (3 Month LIBOR + 1.25%), due 7/1/26 (a) | 4,000,000 | 4,013,725 | ||||||
6.30%, due 5/15/24 (c)(d) | 10,800,000 | 10,735,200 | ||||||
Citizens Financial Group, Inc. | ||||||||
4.15%, due 9/28/22 (b) | 2,270,000 | 2,253,725 | ||||||
6.00%, due 7/6/23 (c)(d) | 3,205,000 | 3,172,950 | ||||||
Goldman Sachs Group, Inc. | ||||||||
2.35%, due 11/15/21 | 9,335,000 | 8,982,604 | ||||||
2.908%, due 6/5/23 (c) | 4,285,000 | 4,129,039 | ||||||
3.00%, due 4/26/22 | 7,000,000 | 6,813,576 | ||||||
3.484% (3 Month LIBOR + 1.17%), due 5/15/26 (a) | 3,220,000 | 3,209,406 | ||||||
3.625%, due 1/22/23 | 3,227,000 | 3,187,470 | ||||||
5.25%, due 7/27/21 | 6,047,000 | 6,288,988 | ||||||
JPMorgan Chase & Co. | ||||||||
6.125%, due 4/30/24 (c)(d) | 7,595,000 | 7,720,318 | ||||||
6.30%, due 4/23/19 | 1,865,000 | 1,895,203 | ||||||
Kreditanstalt Fuer Wiederaufbau | 12,800,000 | 12,765,838 | ||||||
Lloyds Banking Group PLC | ||||||||
4.582%, due 12/10/25 | 3,465,000 | 3,341,769 | ||||||
4.65%, due 3/24/26 | 1,985,000 | 1,921,028 | ||||||
Morgan Stanley | ||||||||
3.125%, due 1/23/23 | 6,380,000 | 6,173,946 | ||||||
3.625%, due 1/20/27 | 6,055,000 | 5,720,863 | ||||||
3.70%, due 10/23/24 | 6,700,000 | 6,528,681 | ||||||
4.00%, due 7/23/25 | 1,920,000 | 1,885,168 |
Principal Amount | Value | |||||||
Banks (continued) |
| |||||||
Morgan Stanley (continued) | ||||||||
4.875%, due 11/1/22 | $ | 4,287,000 | $ | 4,422,615 | ||||
5.00%, due 11/24/25 | 2,465,000 | 2,520,406 | ||||||
5.45%, due 7/15/19 (c)(d) | 11,425,000 | 11,526,454 | ||||||
7.30%, due 5/13/19 | 3,000,000 | 3,066,120 | ||||||
PNC Bank N.A. | 3,925,000 | 3,652,258 | ||||||
Royal Bank of Canada | 5,565,000 | 5,462,654 | ||||||
Royal Bank of Scotland Group PLC | 8,746,000 | 8,619,552 | ||||||
Santander Holdings USA, Inc. | ||||||||
3.40%, due 1/18/23 | 1,500,000 | 1,431,804 | ||||||
3.70%, due 3/28/22 (e) | 2,000,000 | 1,965,862 | ||||||
4.40%, due 7/13/27 | 1,445,000 | 1,348,608 | ||||||
Santander UK Group Holdings PLC | 2,650,000 | 2,560,042 | ||||||
Toronto-Dominion Bank | 6,995,000 | 6,718,077 | ||||||
U.S. Bank N.A. | 6,935,000 | 6,936,933 | ||||||
Wells Fargo & Co. (c) | ||||||||
3.584%, due 5/22/28 | 2,145,000 | 2,041,386 | ||||||
5.90%, due 6/15/24 (d) | 3,690,000 | 3,717,675 | ||||||
Wells Fargo Bank N.A. | 2,000,000 | 1,983,067 | ||||||
|
| |||||||
234,205,462 | ||||||||
|
| |||||||
Beverages 1.3% |
| |||||||
Constellation Brands, Inc. | 6,765,000 | 6,929,491 | ||||||
Diageo Capital PLC | 4,505,000 | 4,509,263 | ||||||
PepsiCo, Inc. | 4,040,000 | 3,919,430 | ||||||
|
| |||||||
15,358,184 | ||||||||
|
| |||||||
Building Materials 1.2% |
| |||||||
Masco Corp. | ||||||||
4.45%, due 4/1/25 | 5,116,000 | 5,095,369 | ||||||
7.125%, due 3/15/20 | 290,000 | 303,538 | ||||||
Standard Industries, Inc. | 8,400,000 | 8,064,000 | ||||||
|
| |||||||
13,462,907 | ||||||||
|
| |||||||
Chemicals 2.0% |
| |||||||
Air Liquide Finance S.A. (b) | ||||||||
1.375%, due 9/27/19 | 4,135,000 | 4,073,711 | ||||||
1.75%, due 9/27/21 | 2,785,000 | 2,656,091 | ||||||
Ashland LLC | 2,970,000 | 2,947,725 |
12 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Chemicals (continued) |
| |||||||
Braskem Netherlands Finance B.V. (b) | ||||||||
3.50%, due 1/10/23 | $ | 1,870,000 | $ | 1,761,914 | ||||
4.50%, due 1/10/28 | 2,505,000 | 2,327,145 | ||||||
Dow Chemical Co. | 693,000 | 712,759 | ||||||
Mexichem S.A.B. de C.V. | 2,600,000 | 2,307,500 | ||||||
W.R. Grace & Co. | 6,410,000 | 6,458,075 | ||||||
|
| |||||||
23,244,920 | ||||||||
|
| |||||||
Commercial Services 0.5% |
| |||||||
IHS Markit, Ltd. | 1,075,000 | 1,059,090 | ||||||
Service Corp. International |
| |||||||
4.625%, due 12/15/27 | 675,000 | 632,813 | ||||||
5.375%, due 1/15/22 | 1,835,000 | 1,848,762 | ||||||
5.375%, due 5/15/24 (e) | 2,200,000 | 2,224,750 | ||||||
|
| |||||||
5,765,415 | ||||||||
|
| |||||||
Computers 1.5% |
| |||||||
Apple, Inc. | ||||||||
1.55%, due 2/8/19 | 6,765,000 | 6,743,293 | ||||||
2.50%, due 2/9/25 | 1,460,000 | 1,362,189 | ||||||
Hewlett Packard Enterprise Co. | 2,520,000 | 2,568,927 | ||||||
International Business Machines Corp. | 4,500,000 | 4,433,758 | ||||||
NCR Corp. | ||||||||
5.00%, due 7/15/22 | 1,500,000 | 1,440,000 | ||||||
6.375%, due 12/15/23 | 1,200,000 | 1,197,000 | ||||||
|
| |||||||
17,745,167 | ||||||||
|
| |||||||
Cosmetics & Personal Care 0.6% |
| |||||||
Estee Lauder Cos., Inc. | 2,785,000 | 2,744,760 | ||||||
Unilever Capital Corp. | 4,500,000 | 4,411,512 | ||||||
|
| |||||||
7,156,272 | ||||||||
|
| |||||||
Diversified Financial Services 2.4% |
| |||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | ||||||||
3.50%, due 5/26/22 | 4,430,000 | 4,321,066 | ||||||
4.50%, due 5/15/21 | 1,465,000 | 1,480,814 | ||||||
Air Lease Corp. | ||||||||
2.125%, due 1/15/20 (e) | 3,275,000 | 3,223,920 | ||||||
2.625%, due 7/1/22 | 2,040,000 | 1,947,294 | ||||||
3.25%, due 3/1/25 | 4,000,000 | 3,712,620 | ||||||
Capital One Bank USA N.A. | 3,000,000 | 2,899,761 |
Principal Amount | Value | |||||||
Diversified Financial Services (continued) |
| |||||||
GE Capital International Funding Co. | $ | 5,165,000 | $ | 5,011,168 | ||||
Peachtree Corners Funding Trust | 1,690,000 | 1,639,923 | ||||||
Springleaf Finance Corp. | 3,100,000 | 3,165,875 | ||||||
|
| |||||||
27,402,441 | ||||||||
|
| |||||||
Electric 4.9% |
| |||||||
Appalachian Power Co. | 1,800,000 | 1,692,244 | ||||||
Baltimore Gas & Electric Co. | 4,150,000 | 3,721,911 | ||||||
CMS Energy Corp. | 3,818,000 | 3,794,667 | ||||||
Consolidated Edison, Inc. | 2,815,000 | 2,769,378 | ||||||
Entergy Arkansas, Inc. | 1,235,000 | 1,207,165 | ||||||
Evergy, Inc. | ||||||||
4.85%, due 6/1/21 (e) | 5,200,000 | 5,307,158 | ||||||
5.292%, due 6/15/22 (f) | 663,000 | 686,883 | ||||||
FirstEnergy Transmission LLC | 5,533,000 | 5,875,104 | ||||||
Florida Power & Light Co. | 2,680,000 | 2,599,249 | ||||||
IPALCO Enterprises, Inc. | 8,560,000 | 8,493,967 | ||||||
MidAmerican Energy Co. | 6,000,000 | 5,683,217 | ||||||
Potomac Electric Power Co. | 1,305,000 | 1,247,509 | ||||||
Public Service Electric & Gas Co. | 3,405,000 | 3,200,022 | ||||||
Public Service Enterprise Group, Inc. | 3,500,000 | 3,349,517 | ||||||
Southwestern Electric Power Co. | 2,750,000 | 2,361,486 | ||||||
WEC Energy Group, Inc. | 5,495,000 | 5,060,511 | ||||||
|
| |||||||
57,049,988 | ||||||||
|
| |||||||
Entertainment 0.7% |
| |||||||
Eldorado Resorts, Inc. | 4,515,000 | 4,740,750 | ||||||
Scientific Games International, Inc. | 3,775,000 | 3,510,750 | ||||||
|
| |||||||
8,251,500 | ||||||||
|
| |||||||
Environmental Controls 0.3% |
| |||||||
Waste Management, Inc. | 3,880,000 | 3,681,050 | ||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Food 3.5% |
| |||||||
Kerry Group Financial Services Unlimited Co. | $ | 4,595,000 | $ | 4,451,560 | ||||
Kroger Co. | 4,130,000 | 4,069,474 | ||||||
Mondelez International Holdings Netherlands B.V. (b) | ||||||||
1.625%, due 10/28/19 | 4,500,000 | 4,425,011 | ||||||
2.00%, due 10/28/21 | 4,885,000 | 4,649,133 | ||||||
Nestle Holdings, Inc. | 4,920,000 | 4,906,287 | ||||||
Smithfield Foods, Inc. (b) | ||||||||
2.70%, due 1/31/20 | 4,005,000 | 3,936,320 | ||||||
3.35%, due 2/1/22 | 2,490,000 | 2,401,643 | ||||||
Sysco Corp. | 5,240,000 | 4,846,020 | ||||||
Tyson Foods, Inc. | ||||||||
2.65%, due 8/15/19 | 1,656,000 | 1,651,343 | ||||||
3.95%, due 8/15/24 | 5,450,000 | 5,421,064 | ||||||
|
| |||||||
40,757,855 | ||||||||
|
| |||||||
Forest Products & Paper 0.8% |
| |||||||
Georgia-Pacific LLC | ||||||||
5.40%, due 11/1/20 (b) | 4,375,000 | 4,533,804 | ||||||
8.00%, due 1/15/24 | 2,945,000 | 3,501,994 | ||||||
International Paper Co. | 693,000 | 833,075 | ||||||
|
| |||||||
8,868,873 | ||||||||
|
| |||||||
Gas 0.6% |
| |||||||
AmeriGas Partners, L.P. / AmeriGas Finance Corp. | ||||||||
5.625%, due 5/20/24 (e) | 2,708,000 | 2,599,680 | ||||||
5.75%, due 5/20/27 | 1,890,000 | 1,752,975 | ||||||
NiSource, Inc. | 3,120,000 | 2,929,028 | ||||||
|
| |||||||
7,281,683 | ||||||||
|
| |||||||
Health Care—Products 1.2% |
| |||||||
Abbott Laboratories | 3,520,000 | 3,482,001 | ||||||
Becton Dickinson & Co. |
| |||||||
2.675%, due 12/15/19 | 3,971,000 | 3,943,518 | ||||||
3.363%, due 6/6/24 | 2,860,000 | 2,732,784 | ||||||
Stryker Corp. | 2,179,000 | 2,139,254 | ||||||
Zimmer Biomet Holdings, Inc. | 1,895,000 | 1,874,624 | ||||||
|
| |||||||
14,172,181 | ||||||||
|
|
Principal Amount | Value | |||||||
Health Care—Services 0.5% |
| |||||||
Laboratory Corp. of America Holdings | $ | 5,500,000 | $ | 5,500,000 | ||||
|
| |||||||
Holding Company—Diversified 0.3% |
| |||||||
CK Hutchison International (17) II, Ltd. | 3,855,000 | 3,546,242 | ||||||
|
| |||||||
Home Builders 4.2% |
| |||||||
D.R. Horton, Inc. | ||||||||
3.75%, due 3/1/19 | 2,750,000 | 2,750,546 | ||||||
5.75%, due 8/15/23 | 4,250,000 | 4,485,969 | ||||||
KB Home | 2,250,000 | 2,354,063 | ||||||
Lennar Corp. | ||||||||
4.50%, due 6/15/19 | 3,300,000 | 3,308,250 | ||||||
4.50%, due 11/15/19 | 4,740,000 | 4,757,775 | ||||||
6.25%, due 12/15/21 | 2,875,000 | 2,968,437 | ||||||
8.375%, due 1/15/21 | 4,560,000 | 4,913,400 | ||||||
MDC Holdings, Inc. | ||||||||
5.50%, due 1/15/24 | 7,025,000 | 6,849,375 | ||||||
5.625%, due 2/1/20 | 1,608,000 | 1,624,080 | ||||||
Meritage Homes Corp. | 7,800,000 | 8,031,660 | ||||||
Toll Brothers Finance Corp. | 5,750,000 | 5,886,562 | ||||||
|
| |||||||
47,930,117 | ||||||||
|
| |||||||
Insurance 4.1% |
| |||||||
Jackson National Life Global Funding | 2,830,000 | 2,797,253 | ||||||
Liberty Mutual Group, Inc. | 3,829,000 | 4,384,205 | ||||||
Lincoln National Corp. | 3,537,000 | 3,236,355 | ||||||
MassMutual Global Funding II | 3,600,000 | 3,480,113 | ||||||
Oil Insurance, Ltd. | 5,727,000 | 5,555,190 | ||||||
Pricoa Global Funding I | 2,725,000 | 2,675,249 | ||||||
Protective Life Corp. | 3,621,000 | 4,871,554 | ||||||
Protective Life Global Funding (b) | ||||||||
1.555%, due 9/13/19 | 4,200,000 | 4,145,571 | ||||||
2.161%, due 9/25/20 | 1,355,000 | 1,324,130 | ||||||
Prudential Financial, Inc. | ||||||||
3.878%, due 3/27/28 | 800,000 | 786,126 | ||||||
4.418%, due 3/27/48 | 2,500,000 | 2,352,413 |
14 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Insurance (continued) |
| |||||||
Scottish Widows, Ltd. | GBP | 6,500,000 | $ | 9,086,507 | ||||
Voya Financial, Inc. | $ | 1,240,000 | 1,172,945 | |||||
XLIT, Ltd. | 1,350,000 | 1,330,052 | ||||||
|
| |||||||
47,197,663 | ||||||||
|
| |||||||
Internet 1.2% |
| |||||||
Amazon.com, Inc. | 3,790,000 | 3,575,614 | ||||||
Booking Holdings, Inc. | 6,700,000 | 6,398,765 | ||||||
Expedia Group, Inc. | 3,485,000 | 3,618,763 | ||||||
|
| |||||||
13,593,142 | ||||||||
|
| |||||||
Iron & Steel 0.6% |
| |||||||
ArcelorMittal | 2,530,000 | 2,799,680 | ||||||
Vale Overseas, Ltd. | 4,330,000 | 4,627,774 | ||||||
|
| |||||||
7,427,454 | ||||||||
|
| |||||||
Lodging 0.8% |
| |||||||
Marriott International, Inc. | ||||||||
3.75%, due 10/1/25 | 5,888,000 | 5,687,191 | ||||||
4.00%, due 4/15/28 | 1,072,000 | 1,032,416 | ||||||
7.15%, due 12/1/19 | 2,341,000 | 2,428,041 | ||||||
|
| |||||||
9,147,648 | ||||||||
|
| |||||||
Machinery—Construction & Mining 0.6% |
| |||||||
Caterpillar Financial Services Corp. | 6,640,000 | 6,565,496 | ||||||
|
| |||||||
Media 0.8% |
| |||||||
Comcast Corp. | 3,135,000 | 3,133,698 | ||||||
Sky PLC | 1,480,000 | 1,462,061 | ||||||
Time Warner Cable, Inc. | 3,605,000 | 3,678,129 | ||||||
Time Warner Entertainment Co., L.P. | 1,087,000 | 1,252,775 | ||||||
|
| |||||||
9,526,663 | ||||||||
|
| |||||||
Mining 0.3% |
| |||||||
Anglo American Capital PLC | 3,000,000 | 2,957,415 | ||||||
|
|
Principal Amount | Value | |||||||
Miscellaneous—Manufacturing 1.9% |
| |||||||
Amsted Industries, Inc. | $ | 7,860,000 | $ | 7,712,625 | ||||
Siemens Financieringsmaatschappij N.V. (b) |
| |||||||
2.15%, due 5/27/20 | 1,900,000 | 1,869,408 | ||||||
2.70%, due 3/16/22 | 3,320,000 | 3,228,099 | ||||||
Textron Financial Corp. | 11,250,000 | 9,618,750 | ||||||
|
| |||||||
22,428,882 | ||||||||
|
| |||||||
Oil & Gas 4.7% |
| |||||||
Anadarko Petroleum Corp. | 19,735,000 | 8,167,612 | ||||||
Concho Resources, Inc. | 2,995,000 | 2,922,302 | ||||||
Gazprom Via Gaz Capital S.A. | 2,520,000 | 2,776,712 | ||||||
Marathon Petroleum Corp. (b) | ||||||||
5.125%, due 4/1/24 | 8,050,000 | 8,201,218 | ||||||
5.125%, due 12/15/26 | 2,000,000 | 2,052,498 | ||||||
Murphy Oil USA, Inc. | 7,318,000 | 7,464,360 | ||||||
Petrobras Global Finance B.V. | 9,350,000 | 9,689,873 | ||||||
Petroleos Mexicanos | 8,225,000 | 7,059,518 | ||||||
QEP Resources, Inc. | 3,350,000 | 3,299,750 | ||||||
Valero Energy Corp. | 2,870,000 | 2,966,845 | ||||||
|
| |||||||
54,600,688 | ||||||||
|
| |||||||
Packaging & Containers 1.2% |
| |||||||
Crown European Holdings S.A. | EUR | 7,700,000 | 9,593,548 | |||||
WestRock Co. | $ | 2,735,000 | 2,566,530 | |||||
WestRock MWV LLC | 1,800,000 | 1,858,348 | ||||||
|
| |||||||
14,018,426 | ||||||||
|
| |||||||
Pharmaceuticals 1.5% |
| |||||||
Bausch Health Cos., Inc. | 2,125,000 | 2,156,875 | ||||||
CVS Health Corp. | 3,750,000 | 3,762,198 | ||||||
CVS Pass-Through Trust | 50,687 | 52,369 | ||||||
Eli Lilly & Co. | 2,200,000 | 2,128,363 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Pharmaceuticals (continued) |
| |||||||
Endo Dac / Endo Finance LLC / Endo Finco, Inc. | $ | 3,865,000 | $ | 3,323,900 | ||||
Johnson & Johnson | 5,450,000 | 5,293,660 | ||||||
Zoetis, Inc. | 770,000 | 766,033 | ||||||
|
| |||||||
17,483,398 | ||||||||
|
| |||||||
Pipelines 0.8% |
| |||||||
Kinder Morgan, Inc. | ||||||||
5.625%, due 11/15/23 (b) | 2,449,000 | 2,592,065 | ||||||
7.75%, due 1/15/32 | 2,035,000 | 2,497,273 | ||||||
MPLX, L.P. | 560,000 | 525,919 | ||||||
Targa Resources Partners, L.P. / Targa Resources Partners Finance Corp. | 3,725,000 | 3,715,687 | ||||||
|
| |||||||
9,330,944 | ||||||||
|
| |||||||
Private Equity 0.1% |
| |||||||
Icahn Enterprises, L.P. / Icahn Enterprises Finance Corp. | 1,390,000 | 1,403,288 | ||||||
|
| |||||||
Real Estate Investment Trusts 1.1% |
| |||||||
American Tower Corp. | 5,500,000 | 5,268,591 | ||||||
Digital Realty Trust, L.P. | 3,605,000 | 3,370,337 | ||||||
Host Hotels & Resorts, L.P. | 472,000 | 458,997 | ||||||
Iron Mountain, Inc. (b) | ||||||||
4.875%, due 9/15/27 | 2,764,000 | 2,459,960 | ||||||
5.25%, due 3/15/28 | 1,793,000 | 1,609,217 | ||||||
Ventas Realty, L.P. / Ventas Capital Corp. | 1,000 | 990 | ||||||
|
| |||||||
13,168,092 | ||||||||
|
| |||||||
Retail 2.2% |
| |||||||
Alimentation Couche-Tard, Inc. | 3,415,000 | 3,380,036 | ||||||
AutoZone, Inc. | 3,565,000 | 3,368,560 | ||||||
Darden Restaurants, Inc. | 4,847,000 | 4,607,928 | ||||||
QVC, Inc. | 6,500,000 | 6,409,049 | ||||||
Starbucks Corp. | 4,279,000 | 3,790,333 |
Principal Amount | Value | |||||||
Retail (continued) |
| |||||||
Walmart, Inc. | $ | 3,285,000 | $ | 3,299,185 | ||||
|
| |||||||
24,855,091 | ||||||||
|
| |||||||
Semiconductors 0.8% |
| |||||||
NXP B.V. / NXP Funding LLC (b) | ||||||||
4.125%, due 6/1/21 | 6,300,000 | 6,260,625 | ||||||
4.625%, due 6/15/22 | 2,960,000 | 2,941,500 | ||||||
|
| |||||||
9,202,125 | ||||||||
|
| |||||||
Software 1.1% |
| |||||||
First Data Corp. (b) | ||||||||
5.00%, due 1/15/24 | 270,000 | 266,625 | ||||||
7.00%, due 12/1/23 | 525,000 | 544,425 | ||||||
Microsoft Corp. | ||||||||
1.10%, due 8/8/19 | 6,040,000 | 5,965,539 | ||||||
1.85%, due 2/6/20 | 6,190,000 | 6,111,679 | ||||||
|
| |||||||
12,888,268 | ||||||||
|
| |||||||
Telecommunications 3.0% |
| |||||||
AT&T, Inc. | ||||||||
3.20%, due 3/1/22 | 5,840,000 | 5,737,830 | ||||||
3.514% (3 Month LIBOR + 1.18%), due 6/12/24 (a) | 2,880,000 | 2,887,989 | ||||||
Crown Castle Towers LLC | 3,825,000 | 3,821,290 | ||||||
Hughes Satellite Systems Corp. | 2,250,000 | 2,281,162 | ||||||
Rogers Communications, Inc. | ||||||||
3.625%, due 12/15/25 | 8,215,000 | 7,924,476 | ||||||
4.30%, due 2/15/48 | 805,000 | 745,845 | ||||||
T-Mobile USA, Inc. | 3,000,000 | 3,076,020 | ||||||
Telefonica Emisiones SAU | 1,000 | 1,038 | ||||||
VEON Holdings B.V. | 3,345,000 | 3,166,277 | ||||||
Verizon Communications, Inc. | ||||||||
4.125%, due 3/16/27 | 685,000 | 677,952 | ||||||
5.15%, due 9/15/23 | 3,573,000 | 3,791,199 | ||||||
|
| |||||||
34,111,078 | ||||||||
|
| |||||||
Textiles 0.4% |
| |||||||
Cintas Corp. No 2 | 4,920,000 | 4,791,905 | ||||||
|
| |||||||
Total Corporate Bonds | 926,183,997 | |||||||
|
|
16 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Loan Assignments 17.3% (a) |
| |||||||
Advertising 0.7% |
| |||||||
Outfront Media Capital LLC | $ | 7,878,750 | $ | 7,878,750 | ||||
|
| |||||||
Auto Parts & Equipment 0.8% |
| |||||||
TI Group Automotive Systems LLC | 8,836,082 | 8,769,812 | ||||||
|
| |||||||
Building Materials 1.2% |
| |||||||
Builders FirstSource, Inc. | 2,681,985 | 2,653,489 | ||||||
Quikrete Holdings, Inc. | 11,250,000 | 11,203,796 | ||||||
|
| |||||||
13,857,285 | ||||||||
|
| |||||||
Buildings & Real Estate 0.4% |
| |||||||
Realogy Group LLC | 4,818,410 | 4,798,331 | ||||||
|
| |||||||
Chemicals 0.4% |
| |||||||
Axalta Coating Systems U.S. Holdings, Inc. Term Loan | 4,531,538 | 4,516,435 | ||||||
|
| |||||||
Commercial Services 2.2% |
| |||||||
Allied Universal Holdco LLC | 8,531,250 | 8,488,594 | ||||||
Global Payments Inc. | 2,536,375 | 2,535,317 | ||||||
KAR Auction Services, Inc. Term Loan B4 | 5,676,441 | 5,669,345 |
Principal Amount | Value | |||||||
Commercial Services (continued) |
| |||||||
USAGM HoldCo LLC | $ | 8,750,000 | $ | 8,618,750 | ||||
|
| |||||||
25,312,006 | ||||||||
|
| |||||||
Computers 0.3% |
| |||||||
Tempo Acquisition LLC Term Loan | 4,058,625 | 4,054,818 | ||||||
|
| |||||||
Containers, Packaging & Glass 0.9% |
| |||||||
Berry Global, Inc. | 3,050,109 | 3,042,484 | ||||||
BWAY Holding Co. | 4,088,250 | 4,061,423 | ||||||
Reynolds Group Holdings, Inc. | 2,768,624 | 2,769,055 | ||||||
|
| |||||||
9,872,962 | ||||||||
|
| |||||||
Electrical Components & Equipment 0.3% |
| |||||||
Electro Rent Corp. | 3,281,550 | 3,306,162 | ||||||
|
| |||||||
Electronics 0.5% |
| |||||||
Dell, Inc. | 6,053,131 | 6,040,522 | ||||||
|
| |||||||
Entertainment 0.2% |
| |||||||
Mohegan Tribal Gaming Authority | 2,871,656 | 2,696,663 | ||||||
|
| |||||||
Environmental Controls 1.0% |
| |||||||
Advanced Disposal Services, Inc. Term Loan B3 | 5,565,000 | 5,560,364 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Loan Assignments (continued) |
| |||||||
Environmental Controls (continued) |
| |||||||
GFL Environmental, Inc. |
| |||||||
2018 Term Loan B | $ | 5,257,128 | $ | 5,181,557 | ||||
2018 Delayed Draw Term Loan | 654,696 | 645,285 | ||||||
|
| |||||||
11,387,206 | ||||||||
|
| |||||||
Food Services 0.2% |
| |||||||
Aramark Services, Inc. | 1,764,946 | 1,762,189 | ||||||
|
| |||||||
Hand & Machine Tools 0.4% |
| |||||||
Milacron LLC | 4,481,149 | 4,478,348 | ||||||
|
| |||||||
Health Care—Products 0.7% |
| |||||||
Ortho-Clinical Diagnostics S.A. | 7,145,440 | 7,115,665 | ||||||
Sotera Health Holdings LLC | 970,225 | 970,225 | ||||||
|
| |||||||
8,085,890 | ||||||||
|
| |||||||
Health Care—Services 0.4% |
| |||||||
Syneos Health, Inc. | 4,984,453 | 4,971,992 | ||||||
|
| |||||||
Household Products & Wares 0.8% |
| |||||||
KIK Custom Products, Inc. | 5,510,478 | 5,481,206 | ||||||
Prestige Brands, Inc. Term Loan B5 | 4,320,599 | 4,322,142 | ||||||
|
| |||||||
9,803,348 | ||||||||
|
| |||||||
Insurance 0.4% |
| |||||||
MPH Acquisition Holdings LLC | 4,251,441 | 4,238,818 | ||||||
|
|
Principal Amount | Value | |||||||
Lodging 0.8% |
| |||||||
Boyd Gaming Corp. Term Loan B3 | $ | 337,280 | $ | 337,522 | ||||
Hilton Worldwide Finance LLC Term Loan B2 | 9,196,081 | 9,198,637 | ||||||
|
| |||||||
9,536,159 | ||||||||
|
| |||||||
Machinery—Diversified 0.5% |
| |||||||
Titan Acquisition, Ltd. | 3,731,250 | 3,507,375 | ||||||
Zebra Technologies Corp. | 2,867,563 | 2,876,166 | ||||||
|
| |||||||
6,383,541 | ||||||||
|
| |||||||
Media 0.7% |
| |||||||
Nielsen Finance LLC | 3,905,525 | 3,883,556 | ||||||
Virgin Media Bristol LLC | 4,100,000 | 4,095,609 | ||||||
|
| |||||||
7,979,165 | ||||||||
|
| |||||||
Mining, Steel, Iron & Non-Precious Metals 0.3% |
| |||||||
Gates Global LLC | 4,001,538 | 4,003,683 | ||||||
|
| |||||||
Pharmaceuticals 0.5% |
| |||||||
Change Healthcare Holdings, Inc. | 5,347,875 | 5,338,960 | ||||||
|
| |||||||
Retail 0.1% |
| |||||||
1011778 B.C. Unlimited Liability Co. Term Loan B3 | 1,546,401 | 1,539,635 | ||||||
|
| |||||||
Software 0.3% |
| |||||||
First Data Corp. | 3,662,825 | 3,654,335 | ||||||
|
|
18 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Loan Assignments (continued) |
| |||||||
Telecommunications 2.0% |
| |||||||
Level 3 Financing, Inc. | $ | 9,000,000 | $ | 9,000,000 | ||||
SBA Senior Finance II LLC | 8,676,707 | 8,653,809 | ||||||
Sprint Communications, Inc. | 5,072,750 | 5,062,184 | ||||||
|
| |||||||
22,715,993 | ||||||||
|
| |||||||
Transportation 0.3% |
| |||||||
XPO Logistics, Inc. | 3,285,000 | 3,289,563 | ||||||
|
| |||||||
Total Loan Assignments | 200,272,571 | |||||||
|
| |||||||
Mortgage-Backed Securities 1.5% |
| |||||||
Commercial Mortgage Loans (Collateralized Mortgage Obligations) 1.5% |
| |||||||
Bayview Commercial Asset Trust | 22,381 | 21,526 | ||||||
BX Commercial Mortgage Trust | 3,705,000 | 3,702,624 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp. | 2,180,000 | 2,223,062 | ||||||
JPMBB Commercial Mortgage Securities Trust | 3,235,000 | 3,136,843 | ||||||
Wells Fargo Commercial Mortgage Trust (b)(i) | ||||||||
Series 2018-1745, Class A | 3,450,000 | 3,373,462 | ||||||
Series 2018-AUS, Class A | 4,200,000 | 4,178,430 | ||||||
|
| |||||||
16,635,947 | ||||||||
|
|
Principal Amount | Value | |||||||
Whole Loan Collateral |
| |||||||
Wells Fargo Mortgage Backed Securities Trust | $ | 64,213 | $ | 65,165 | ||||
|
| |||||||
Total Mortgage-Backed Securities | 16,701,112 | |||||||
|
| |||||||
U.S. Government & Federal Agencies 0.1% |
| |||||||
United States Treasury Bonds 0.1% |
| |||||||
5.375%, due 2/15/31 | 870,000 | 1,061,638 | ||||||
|
| |||||||
United States Treasury Notes 0.0%‡ |
| |||||||
2.125%, due 8/15/21 | 70,000 | 68,493 | ||||||
|
| |||||||
Total U.S. Government & Federal Agencies | 1,130,131 | |||||||
|
| |||||||
Total Long-Term Bonds | 1,153,047,225 | |||||||
|
| |||||||
Shares | ||||||||
Common Stocks 0.0%‡ |
| |||||||
Commercial Services & Supplies 0.0%‡ |
| |||||||
Quad/Graphics, Inc. | 14 | 216 | ||||||
|
| |||||||
Media 0.0%‡ |
| |||||||
ION Media Networks, Inc. 3/12/10 (g)(h)(j)(k)(l) | 22 | 13,625 | ||||||
|
| |||||||
Tobacco 0.0%‡ |
| |||||||
Turning Point Brands, Inc. | 6,802 | 279,562 | ||||||
|
| |||||||
Total Common Stocks | 293,403 | |||||||
|
| |||||||
Short-Term Investments 1.5% |
| |||||||
Affiliated Investment Company 1.3% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.075% (m) | 15,390,869 | 15,390,869 | ||||||
|
| |||||||
Total Affiliated Investment Company | 15,390,869 | |||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Repurchase Agreement 0.0%‡ |
| |||||||
Fixed Income Clearing Corp. | $ | 338,795 | $ | 338,795 | ||||
|
| |||||||
Total Repurchase Agreement | 338,795 | |||||||
|
| |||||||
U.S. Governments 0.2% |
| |||||||
United States Treasury Bills | 2,370,000 | 2,368,062 | ||||||
|
| |||||||
Total U.S. Governments | 2,368,062 | |||||||
|
| |||||||
Total Short-Term Investments | 18,097,726 | |||||||
|
| |||||||
Total Investments, Before Investments Sold Short | 101.3 | % | 1,171,438,354 | |||||
|
| |||||||
Investments Sold Short (2.1%) Corporate Bonds Sold Short (2.1%) |
| |||||||
Internet (0.8%) |
| |||||||
Netflix, Inc. | $ | (10,400,000 | ) | (9,555,000 | ) | |||
|
| |||||||
Oil & Gas (1.3%) |
| |||||||
Noble Energy, Inc. | ||||||||
4.15%, due 12/15/21 | (3,000,000 | ) | (3,021,572 | ) | ||||
3.90%, due 11/15/24 | (12,115,000 | ) | (11,775,345 | ) | ||||
|
| |||||||
(14,796,917 | ) | |||||||
|
| |||||||
Total Corporate Bonds Sold Short (Proceeds $24,153,682) | (24,351,917 | ) | ||||||
|
| |||||||
Total Investments Sold Short (Proceeds $24,153,682) | (24,351,917 | ) | ||||||
|
| |||||||
Total Investments, Net of Investments Sold Short | 99.2 | % | 1,147,086,437 | |||||
|
| |||||||
Other Assets, Less Liabilities | 0.8 | 9,756,629 | ||||||
Net Assets | 100.0 | % | $ | 1,156,843,066 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | Floating rate—Rate shown was the rate in effect as of October 31, 2018. |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(c) | Fixed to floating rate—Rate shown was the rate in effect as of October 31, 2018. |
(d) | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
(e) | Security, or a portion thereof, was maintained in a segregated account at the Fund’s custodian as collateral for securities Sold Short (See Note 2(O)). |
(f) | Step coupon—Rate shown was the rate in effect as of October 31, 2018. |
(g) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of October 31, 2018, the total market value of fair valued securities was $65,994, which represented less than one-tenth of a percent of the Fund’s net assets. |
(h) | Illiquid security—As of October 31, 2018, the total market value of these securities deemed illiquid under procedures approved by the Board of Trustees was $3,716,249, which represented 0.3% of the Fund’s net assets. (Unaudited) |
(i) | Collateral strip rate—A bond whose interest was based on the weighted net interest rate of the collateral. The coupon rate adjusts periodically based on a predetermined schedule. Rate shown was the rate in effect as of October 31, 2018. |
(j) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(k) | Restricted security. (See Note 2(Q)) |
(l) | Non-income producing security. |
(m) | Current yield as of October 31, 2018. |
(n) | Interest rate shown represents yield to maturity. |
20 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
As of October 31, 2018, the Fund held the following foreign currency forward contracts1:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||||
GBP | 7,761,000 | USD | 9,887,514 | JPMorgan Chase Bank N.A. | 11/1/18 | $ | 32,598 | |||||||||||||
USD | 13,832,167 | EUR | 11,755,000 | JPMorgan Chase Bank N.A. | 11/1/18 | 517,862 | ||||||||||||||
USD | 13,261,660 | EUR | 11,569,000 | JPMorgan Chase Bank N.A. | 2/1/19 | 47,606 | ||||||||||||||
USD | 10,253,057 | GBP | 7,761,000 | JPMorgan Chase Bank N.A. | 11/1/18 | 332,945 | ||||||||||||||
Total unrealized appreciation |
| 931,011 | ||||||||||||||||||
EUR | 11,755,000 | USD | 13,361,772 | JPMorgan Chase Bank N.A. | 11/1/18 | $ | (47,466 | ) | ||||||||||||
USD | 10,011,946 | GBP | 7,820,000 | JPMorgan Chase Bank N.A. | 2/1/19 | (31,834 | ) | |||||||||||||
Total unrealized depreciation |
| (79,300 | ) | |||||||||||||||||
Net unrealized appreciation |
| $ | 851,711 |
1. | Foreign Currency Forward Contracts are subject to limitations such that they cannot be “sold or repurchased,” although the Fund would be able to exit the transaction through other means, such as through the execution of an offsetting transaction. |
As of October 31, 2018, the Fund held the following futures contracts1:
Type | Number of Contracts Long (Short) | Expiration Date | Value at Trade Date | Current Notional Amount | Unrealized Appreciation (Depreciation)2 | |||||||||||||||
5-Year United States Treasury Note | 79 | December 2018 | $ | 8,868,539 | $ | 8,878,243 | $ | 9,704 | ||||||||||||
10-Year United States Treasury Note | (1,247 | ) | December 2018 | (147,427,920 | ) | (147,691,563 | ) | (263,643 | ) | |||||||||||
10-Year United States Treasury Ultra Note | (660 | ) | December 2018 | (82,508,626 | ) | (82,572,188 | ) | (63,562 | ) | |||||||||||
United States Treasury Ultra Bond | 7 | December 2018 | 1,057,017 | 1,044,531 | (12,486 | ) | ||||||||||||||
Euro-BTP | (24 | ) | December 2018 | (3,331,313 | ) | (3,306,614 | ) | 24,699 | ||||||||||||
Euro Bund | 20 | December 2018 | 3,592,451 | 3,630,371 | 37,920 | |||||||||||||||
United States Treasury Long Bond | (155 | ) | December 2018 | (22,140,741 | ) | (21,409,375 | ) | 731,366 | ||||||||||||
|
|
|
|
|
| |||||||||||||||
$ | (241,890,593 | ) | $ | (241,426,595 | ) | $ | 463,998 | |||||||||||||
|
|
|
|
|
|
1. | As of October 31, 2018, cash in the amount of $2,848,374 was on deposit with a broker or futures commission merchant for futures transactions. |
2. | Represents the difference between the value of the contracts at the time they were opened and the value as of October 31, 2018. |
Swap Contracts
As of October 31, 2018, the Fund held the following centrally cleared interest rate swap agreements1:
Notional Amount | Currency | Expiration Date | Payments made by Fund | Payments Received by Fund | Payment Frequency Paid/ Received | Upfront Premiums Received/ (Paid) | Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||
$250,000,000 | USD | 8/8/2019 | Fixed 1.621 | % | 3-Month USD-LIBOR | Quarterly | $ | 22,789 | $ | 2,330,718 | $ | 2,353,507 | ||||||||||||||||
150,000,000 | USD | 11/9/2019 | Fixed 1.83 | % | 3-Month USD-LIBOR | Quarterly | (7,037 | ) | 1,667,009 | 1,659,972 | ||||||||||||||||||
40,000,000 | USD | 3/16/2023 | Fixed 2.793 | % | 3-Month USD-LIBOR | Quarterly | — | 545,451 | 545,451 | |||||||||||||||||||
41,000,000 | USD | 3/29/2023 | Fixed 2.762 | % | 3-Month USD-LIBOR | Quarterly | — | 616,222 | 616,222 | |||||||||||||||||||
$ | 15,752 | $ | 5,159,400 | $ | 5,175,152 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Portfolio of Investments October 31, 2018 (continued)
As of October 31, 2018, the Fund held the following OTC credit default swap contracts:
Reference Entity | Counterparty | Termination Date | Buy/Sell Protection2 | Notional Amount (000)3 | (Pay)/ Receive Fixed Rate4 | Payment Frequency Paid/ Received | Upfront Premiums Received/ (Paid) | Value | Unrealized Appreciation/ (Depreciation)5 | |||||||||||||||||||||||||||
Staples, Inc. | Credit Suisse First Boston | 6/20/2019 | Buy | $ | 7,000 | 1.00 | % | Quarterly | $ | (61,819 | ) | $ | (26,269 | ) | $ | (88,088 | ) | |||||||||||||||||||
$ | (61,819 | ) | $ | (26,269 | ) | $ | (88,088 | ) |
1. | As of October 31, 2018, cash in the amount of $1,483,018 was on deposit with a broker for centrally cleared swap agreements. |
2. | Buy—Fund pays premium and buys credit protection. If a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
Sell—Fund receives premium and sells credit protection. If a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
3. | The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap contract. |
4. | The annual fixed rate represents the interest received by the Fund (as a seller of protection) or paid by the Fund (as a buyer of protection) annually on the notional amount of the credit default swap contract. |
5. | Represents the difference between the value of the credit default swap contracts at the time they were opened and the value at October 31, 2018. |
The following abbreviations are used in the preceding pages:
BTP—Buoni del Tesoro Poliennali (Eurex Exchange index)
EUR—Euro
GBP—British Pound Sterling
LIBOR—London Interbank Offered Rate
USD—United States Dollar
22 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets and liabilities:
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 8,759,414 | $ | — | $ | 8,759,414 | ||||||||
Corporate Bonds | — | 926,183,997 | — | 926,183,997 | ||||||||||||
Loan Assignments | — | 200,272,571 | — | 200,272,571 | ||||||||||||
Mortgage-Backed Securities | — | 16,701,112 | — | 16,701,112 | ||||||||||||
U.S. Government & Federal Agencies | — | 1,130,131 | — | 1,130,131 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 1,153,047,225 | — | 1,153,047,225 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (b) | 279,778 | — | 13,625 | 293,403 | ||||||||||||
Short-Term Investments | ||||||||||||||||
Affiliated Investment Company | 15,390,869 | — | — | 15,390,869 | ||||||||||||
Repurchase Agreements | — | 338,795 | — | 338,795 | ||||||||||||
U.S. Government | — | 2,368,062 | — | 2,368,062 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Short-Term Investments | 15,390,869 | 2,706,857 | — | 18,097,726 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 15,670,647 | 1,155,754,082 | 13,625 | 1,171,438,354 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (c) | — | 931,011 | — | 931,011 | ||||||||||||
Futures Contracts (c) | 803,689 | — | — | 803,689 | ||||||||||||
Interest Rate Swap Contracts (c) | — | 5,175,152 | — | 5,175,152 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | 803,689 | 6,106,163 | — | 6,909,852 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 16,474,336 | $ | 1,161,860,245 | $ | 13,625 | $ | 1,178,348,206 | ||||||||
|
|
|
|
|
|
|
|
Liability Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Long-Term Bonds Sold Short | ||||||||||||||||
Corporate Bonds Sold Short | $ | — | $ | (24,351,917 | ) | $ | — | $ | (24,351,917 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds Sold Short | — | (24,351,917 | ) | — | (24,351,917 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (c) | — | (79,300 | ) | — | (79,300 | ) | ||||||||||
Futures Contracts (c) | (339,691 | ) | — | — | (339,691 | ) | ||||||||||
Credit Default Swap Contracts (c) | — | (88,088 | ) | — | (88,088 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | (339,691 | ) | (167,388 | ) | — | (507,079 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities Sold Short and Other Financial Instruments | $ | (339,691 | ) | $ | (24,519,305 | ) | $ | — | $ | (24,858,996 | ) | |||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $13,625 is held in Media within the Common Stocks section of the Portfolio of Investments. |
(c) | The value listed for these securities reflects unrealized appreciation (depreciation) as shown on the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Portfolio of Investments October 31, 2018 (continued)
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments in | Balance as of October 31, 2017 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales (a) | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of October 31, 2018 | Change in Unrealized Appreciation (Depreciation) from Investments Still Held at October 31, 2018 (b) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Loan Assignments | ||||||||||||||||||||||||||||||||||||||||
Commercial Services | $ | 8,531,250 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (8,531,250 | ) | $ | — | $ | — | |||||||||||||||||||
Electrical Components & Equipment | 3,356,387 | — | — | — | — | — | — | (3,356,387 | ) | — | — | |||||||||||||||||||||||||||||
Iron & Steel | 7,103,396 | 1,196 | 9,041 | (63,116 | ) | — | (7,050,517 | ) | — | — | — | — | ||||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Media | 14,929 | — | — | (1,304 | ) | — | — | — | — | 13,625 | (1,304 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 19,005,962 | $ | 1,196 | $ | 9,041 | $ | (64,420 | ) | $ | — | $ | (7,050,517 | ) | $ | — | $ | (11,887,637 | ) | $ | 13,625 | $ | (1,304 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Sales include principal reductions. |
(b) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
In the year ended October 31, 2018, securities with a market value of $11,887,637 transferred from Level 3 to Level 2 as the fair value obtained from an independent pricing service, utilized significant other observable inputs. As of October 31, 2017, the fair value obtained for these securities, as determined by an independent pricing service, utilized significant unobservable inputs.
24 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2018
Assets | ||||
Investment in securities before investments sold short, at value (identified cost $1,181,399,730) | $ | 1,156,047,485 | ||
Investment in affiliated investment companies, at value (identified cost $15,390,869) | 15,390,869 | |||
Cash collateral on deposit at broker for futures contracts | 2,848,374 | |||
Cash collateral on deposit at broker for swap contracts | 1,483,018 | |||
Cash denominated in foreign currencies (identified cost $96,817) | 94,272 | |||
Receivables: | ||||
Dividends and interest | 10,210,687 | |||
Investment securities sold | 4,375,583 | |||
Fund shares sold | 1,371,387 | |||
Variation margin on futures contracts | 818,452 | |||
Variation margin on centrally cleared swap contracts | 264,455 | |||
Unrealized appreciation on foreign currency forward contracts | 931,011 | |||
Premiums paid for OTC swap contracts | 61,819 | |||
Other assets | 52,919 | |||
|
| |||
Total assets | 1,193,950,331 | |||
|
| |||
Liabilities | ||||
Investments sold short (proceeds $24,153,682) | 24,351,917 | |||
Due to custodian | 298 | |||
Payables: | ||||
Investment securities purchased | 7,584,596 | |||
Fund shares redeemed | 2,940,628 | |||
Manager (See Note 3) | 580,674 | |||
Interest on investments sold short | 474,707 | |||
Transfer agent (See Note 3) | 346,958 | |||
NYLIFE Distributors (See Note 3) | 173,754 | |||
Broker fees and charges on short sales | 123,581 | |||
Shareholder communication | 61,863 | |||
Professional fees | 19,313 | |||
Custodian | 13,043 | |||
Trustees | 2,888 | |||
Accrued expenses | 16,104 | |||
Dividend payable | 249,553 | |||
Unrealized depreciation on OTC swap contracts | 88,088 | |||
Unrealized depreciation on foreign currency forward contracts | 79,300 | |||
|
| |||
Total liabilities | 37,107,265 | |||
|
| |||
Net assets | $ | 1,156,843,066 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 1,337,230 | ||
Additional paid-in capital | 1,351,261,948 | |||
|
| |||
1,352,599,178 | ||||
Total distributable earnings (loss) | (195,756,112 | ) | ||
|
| |||
Net assets | $ | 1,156,843,066 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 220,617,825 | ||
|
| |||
Shares of beneficial interest outstanding | 25,502,904 | |||
|
| |||
Net asset value per share outstanding | $ | 8.65 | ||
Maximum sales charge (4.50% of offering price) | 0.41 | |||
|
| |||
Maximum offering price per share outstanding | $ | 9.06 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 20,451,379 | ||
|
| |||
Shares of beneficial interest outstanding | 2,344,873 | |||
|
| |||
Net asset value per share outstanding | $ | 8.72 | ||
Maximum sales charge (4.50% of offering price) | 0.41 | |||
|
| |||
Maximum offering price per share outstanding | $ | 9.13 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 11,014,535 | ||
|
| |||
Shares of beneficial interest outstanding | 1,279,744 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.61 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 128,279,002 | ||
|
| |||
Shares of beneficial interest outstanding | 14,916,197 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.60 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 717,129,027 | ||
|
| |||
Shares of beneficial interest outstanding | 82,823,927 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.66 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 6,657,303 | ||
|
| |||
Shares of beneficial interest outstanding | 769,954 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.65 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 190,427 | ||
|
| |||
Shares of beneficial interest outstanding | 22,008 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.65 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 52,503,568 | ||
|
| |||
Shares of beneficial interest outstanding | 6,063,373 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.66 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 49,692,841 | ||
Dividend distributions from affiliated investment companies | 186,167 | |||
Unaffiliated dividends | 1,101 | |||
Other | 4,131 | |||
|
| |||
Total income | 49,884,240 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 7,224,495 | |||
Distribution/Service—Class A (See Note 3) | 652,903 | |||
Distribution/Service—Investor Class (See Note 3) | 52,548 | |||
Distribution/Service—Class B (See Note 3) | 131,848 | |||
Distribution/Service—Class C (See Note 3) | 1,482,132 | |||
Distribution/Service—Class R2 (See Note 3) | 5,632 | |||
Distribution/Service—Class R3 (See Note 3) | 628 | |||
Transfer agent (See Note 3) | 2,134,818 | |||
Interest on investments sold short | 1,763,324 | |||
Broker fees and charges on short sales | 905,958 | |||
Shareholder communication | 152,387 | |||
Registration | 148,967 | |||
Professional fees | 132,461 | |||
Interest expense | 83,750 | |||
Trustees | 27,670 | |||
Custodian | 22,636 | |||
Shareholder service (See Note 3) | 2,379 | |||
Miscellaneous | 57,466 | |||
|
| |||
Total expenses | 14,982,002 | |||
|
| |||
Net investment income (loss) | 34,902,238 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Swap Contracts and Foreign Currency Transactions |
| |||
Net realized gain (loss) on: | ||||
Investment transactions | (5,210,444 | ) | ||
Investments sold short | 238,866 | |||
Futures transactions | 10,333,129 | |||
Swap transactions | 6,537,699 | |||
Foreign currency forward transactions | 559,290 | |||
Foreign currency transactions | (427,684 | ) | ||
|
| |||
Net realized gain (loss) on investments, investments sold short, futures transactions, swap transactions and foreign currency transactions | 12,030,856 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (43,939,484 | ) | ||
Investments sold short | 1,733,909 | |||
Futures contracts | (1,760,785 | ) | ||
Swap contracts | 155,770 | |||
Foreign currency forward contracts | 1,054,807 | |||
Translation of other assets and liabilities in foreign currencies | (14,499 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments, investments sold short, futures contracts, swap contracts and foreign currency transactions | (42,770,282 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments, investments sold short, futures transactions, swap transactions and foreign currency transactions | (30,739,426 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 4,162,812 | ||
|
|
26 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 34,902,238 | $ | 38,560,437 | ||||
Net realized gain (loss) on investments, investments sold short, futures transactions, swap transactions and foreign currency transactions | 12,030,856 | 8,347,977 | ||||||
Net change in unrealized appreciation (depreciation) on investments, investments sold short, futures contracts, swap contracts and foreign currency transactions | (42,770,282 | ) | 16,406,413 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 4,162,812 | 63,314,827 | ||||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (7,841,617 | ) | ||||||
Investor Class | (629,840 | ) | ||||||
Class B | (297,747 | ) | ||||||
Class C | (3,365,854 | ) | ||||||
Class I | (25,600,022 | ) | ||||||
Class R2 | (77,254 | ) | ||||||
Class R3 | (3,444 | ) | ||||||
Class R6 | (1,320,203 | ) | ||||||
|
| |||||||
(39,135,981 | ) | |||||||
|
| |||||||
Dividends to shareholders from net investment income: | ||||||||
Class A | (11,903,949 | ) | ||||||
Investor Class | (1,038,268 | ) | ||||||
Class B | �� | (465,521 | ) | |||||
Class C | (5,354,418 | ) | ||||||
Class I | (29,662,522 | ) | ||||||
Class R2 | (22,874 | ) | ||||||
Class R3 | (2,527 | ) | ||||||
|
| |||||||
(48,450,079 | ) | |||||||
|
| |||||||
Distributions to shareholders from return of capital: | ||||||||
Class A | (119,065 | ) | (174,809 | ) | ||||
Investor Class | (9,563 | ) | (15,247 | ) | ||||
Class B | (4,521 | ) | (6,836 | ) | ||||
Class C | (51,106 | ) | (78,629 | ) | ||||
Class I | (388,702 | ) | (435,593 | ) | ||||
Class R2 | (1,173 | ) | (336 | ) | ||||
Class R3 | (52 | ) | (37 | ) | ||||
Class R6 | (20,046 | ) | — | |||||
|
| |||||||
(594,228 | ) | (711,487 | ) | |||||
|
| |||||||
Total dividends and distributions to shareholders | (39,730,209 | ) | (49,161,566 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 317,200,945 | 338,495,940 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 36,078,388 | 43,219,924 | ||||||
Cost of shares redeemed | (506,161,638 | ) | (470,140,388 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (152,882,305 | ) | (88,424,524 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (188,449,702 | ) | (74,271,263 | ) |
2018 | 2017 | |||||||
Net Assets | ||||||||
Beginning of year | $ | 1,345,292,768 | $ | 1,419,564,031 | ||||
|
| |||||||
End of year(2) | $ | 1,156,843,066 | $ | 1,345,292,768 | ||||
|
|
|
|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $(108,683) in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | $ | 9.28 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.24 | 0.25 | 0.35 | 0.36 | 0.36 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.23 | ) | 0.15 | 0.08 | (0.63 | ) | (0.05 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.00 | )‡ | (0.02 | ) | 0.02 | 0.01 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.02 | 0.40 | 0.41 | (0.25 | ) | 0.32 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | ||||||||||
Return of capital | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 8.65 | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 0.25 | % | 4.65 | % | 4.94 | % | (2.70 | %) | 3.48 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.69 | % | 2.79 | % | 4.04 | % | 4.01 | % | 3.81 | % | ||||||||||
Net expenses (excluding short sale expenses) (c) | 1.03 | % | 1.01 | % | 1.00 | % | 0.96 | % | 0.98 | % | ||||||||||
Expenses (including short sales expenses) (c) | 1.25 | % | 1.13 | % | 1.16 | % | 1.01 | % | 1.04 | % | ||||||||||
Short sale expenses | 0.22 | % | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | % | ||||||||||
Portfolio turnover rate | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 220,618 | $ | 302,192 | $ | 412,834 | $ | 584,184 | $ | 675,552 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.97 | $ | 8.88 | $ | 8.78 | $ | 9.33 | $ | 9.34 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.24 | 0.24 | 0.35 | 0.36 | 0.36 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.23 | ) | 0.16 | 0.10 | (0.63 | ) | (0.05 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.02 | 0.40 | 0.42 | (0.25 | ) | 0.32 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | ||||||||||
Return of capital | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.30 | ) | (0.33 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 8.72 | $ | 8.97 | $ | 8.88 | $ | 8.78 | $ | 9.33 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 0.23 | % | 4.59 | % | 5.00 | % | (2.70 | %) | 3.42 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.68 | % | 2.74 | % | 4.01 | % | 3.99 | % | 3.78 | % | ||||||||||
Net expenses (excluding short sale expenses) (c) | 1.05 | % | 1.03 | % | 1.02 | % | 0.98 | % | 1.00 | % | ||||||||||
Expenses (including short sales) (c) | 1.27 | % | 1.15 | % | 1.18 | % | 1.03 | % | 1.06 | % | ||||||||||
Short sale expenses | 0.22 | % | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | % | ||||||||||
Portfolio turnover rate | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 20,451 | $ | 22,033 | $ | 31,851 | $ | 32,498 | $ | 31,690 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
28 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.86 | $ | 8.77 | $ | 8.68 | $ | 9.23 | $ | 9.24 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.17 | 0.18 | 0.28 | 0.29 | 0.28 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.23 | ) | 0.15 | 0.10 | (0.62 | ) | (0.04 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.05 | ) | 0.33 | 0.35 | (0.31 | ) | 0.25 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.20 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | ||||||||||
Return of capital | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.20 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 8.61 | $ | 8.86 | $ | 8.77 | $ | 8.68 | $ | 9.23 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (0.52 | %) | 3.86 | % | 4.16 | % | (3.45 | %) | 2.71 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.92 | % | 2.00 | % | 3.26 | % | 3.24 | % | 3.03 | % | ||||||||||
Net expenses (excluding short sales expenses) (c) | 1.80 | % | 1.78 | % | 1.77 | % | 1.73 | % | 1.75 | % | ||||||||||
Expenses (including short sales expenses) (c) | 2.02 | % | 1.90 | % | 1.93 | % | 1.78 | % | 1.81 | % | ||||||||||
Short sale expenses | 0.22 | % | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | % | ||||||||||
Portfolio turnover rate | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 11,015 | $ | 15,223 | $ | 18,313 | $ | 19,833 | $ | 22,460 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.85 | $ | 8.76 | $ | 8.67 | $ | 9.22 | $ | 9.23 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.17 | 0.18 | 0.28 | 0.29 | 0.28 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.23 | ) | 0.15 | 0.10 | (0.62 | ) | (0.04 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.05 | ) | 0.33 | 0.35 | (0.31 | ) | 0.25 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.20 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | ||||||||||
Return of capital | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.20 | ) | (0.24 | ) | (0.26 | ) | (0.24 | ) | (0.26 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 8.60 | $ | 8.85 | $ | 8.76 | $ | 8.67 | $ | 9.22 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (0.52 | %) | 3.86 | % | 4.16 | % | (3.46 | %) | 2.71 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.92 | % | 2.00 | % | 3.27 | % | 3.24 | % | 3.05 | % | ||||||||||
Net expenses (excluding short sale expenses) (c) | 1.80 | % | 1.78 | % | 1.77 | % | 1.73 | % | 1.75 | % | ||||||||||
Expenses (including short sales) (c) | 2.02 | % | 1.90 | % | 1.93 | % | 1.78 | % | 1.81 | % | ||||||||||
Short sale expenses | 0.22 | % | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | % | ||||||||||
Portfolio turnover rate | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 128,279 | $ | 167,595 | $ | 220,513 | $ | 315,183 | $ | 345,900 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class I | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.91 | $ | 8.82 | $ | 8.72 | $ | 9.28 | $ | 9.29 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.26 | 0.26 | 0.37 | 0.38 | 0.38 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.23 | ) | 0.16 | 0.11 | (0.63 | ) | (0.05 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.01 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.04 | 0.42 | 0.45 | (0.23 | ) | 0.34 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.29 | ) | (0.33 | ) | (0.35 | ) | �� | (0.33 | ) | (0.35 | ) | |||||||||
Return of capital | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.29 | ) | (0.33 | ) | (0.35 | ) | (0.33 | ) | (0.35 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 8.66 | $ | 8.91 | $ | 8.82 | $ | 8.72 | $ | 9.28 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 0.51 | % | 4.90 | % | 5.32 | % | (2.56 | %) | 3.73 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.94 | % | 2.99 | % | 4.30 | % | 4.25 | % | 4.08 | % | ||||||||||
Net expenses (excluding short sale expenses) (c) | 0.78 | % | 0.76 | % | 0.75 | % | 0.71 | % | 0.73 | % | ||||||||||
Expenses (including short sales) (c) | 1.00 | % | 0.88 | % | 0.91 | % | 0.76 | % | 0.79 | % | ||||||||||
Short sale expenses | 0.22 | % | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | % | ||||||||||
Portfolio turnover rate | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 717,129 | $ | 837,363 | $ | 735,359 | $ | 1,263,695 | $ | 1,481,314 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | February 28, 2014** through October 31, | |||||||||||||||||||
Class R2 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of period | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | $ | 9.39 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.23 | 0.23 | 0.34 | 0.35 | 0.23 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.23 | ) | 0.16 | 0.10 | (0.63 | ) | (0.16 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.00 | )‡ | (0.03 | ) | 0.02 | 0.02 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.01 | 0.39 | 0.41 | (0.26 | ) | 0.09 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.26 | ) | (0.30 | ) | (0.32 | ) | (0.29 | ) | (0.21 | ) | ||||||||||
Return of capital | (0.00 | )‡ | (0.00 | )‡ | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.26 | ) | (0.30 | ) | (0.32 | ) | (0.29 | ) | (0.21 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of period | $ | 8.65 | $ | 8.90 | $ | 8.81 | $ | 8.72 | $ | 9.27 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 0.16 | % | 4.54 | % | 4.84 | % | (2.81 | %) | 0.99 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.67 | % | 2.63 | % | 3.97 | % | 3.87 | % | 3.78 | %†† | ||||||||||
Net expenses (c) | 1.14 | % | 1.11 | % | 1.12 | % | 1.06 | % | 1.08 | %†† | ||||||||||
Expenses (including short sales) (c) | 1.34 | % | 1.23 | % | 1.28 | % | 1.11 | % | 1.14 | %†† | ||||||||||
Short sale expenses | 0.20 | % | 0.12 | % | 0.16 | % | 0.05 | % | 0.06 | %†† | ||||||||||
Portfolio turnover rate | 22 | % | 41 | % | 15 | % | 22 | % | 19 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 6,657 | $ | 773 | $ | 662 | $ | 112 | $ | 336 |
** | Inception date. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
30 | MainStay MacKay Unconstrained Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | February 29, | |||||||||||
Class R3 | 2018 | 2017 | 2016 | |||||||||
Net asset value at beginning of period | $ | 8.90 | $ | 8.81 | $ | 8.20 | ||||||
|
|
|
|
|
| |||||||
Net investment income (loss) (a) | 0.21 | 0.21 | 0.21 | |||||||||
Net realized and unrealized gain (loss) on investments | (0.23 | ) | 0.16 | 0.86 | ||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | (0.00 | )‡ | (0.27 | ) | |||||||
|
|
|
|
|
| |||||||
Total from investment operations | (0.01 | ) | 0.37 | 0.80 | ||||||||
|
|
|
|
|
| |||||||
Less dividends and distributions: | ||||||||||||
From net investment income | (0.24 | ) | (0.28 | ) | (0.19 | ) | ||||||
Return of capital | (0.00 | )‡ | (0.00 | )‡ | .— | |||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.24 | ) | (0.28 | ) | (0.19 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value at end of period | $ | 8.65 | $ | 8.90 | $ | 8.81 | ||||||
|
|
|
|
|
| |||||||
Total investment return (b) | (0.09 | %) | 4.28 | % | 9.77 | % | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Net investment income (loss) | 2.36 | % | 2.34 | % | 3.32 | %†† | ||||||
Net expenses (c) | 1.38 | % | 1.36 | % | 1.34 | %†† | ||||||
Expenses (including short sales) (c) | 1.60 | % | 1.48 | % | 1.50 | %†† | ||||||
Short sale expenses | 0.22 | % | 0.12 | % | 0.16 | % | ||||||
Portfolio turnover rate | 22 | % | 41 | % | 15 | % | ||||||
Net assets at end of period (in 000’s) | $ | 190 | $ | 114 | $ | 32 |
** | Inception date. |
†† | Annualized. |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Class R6 | February 28, 2018** through October 31, 2018 | |||
Net asset value at beginning of period | $ | 8.83 | ||
|
| |||
Net investment income (loss) (a) | 0.19 | |||
Net realized and unrealized gain (loss) on investments | (0.15 | ) | ||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.01 | |||
|
| |||
Total from investment operations | 0.05 | |||
|
| |||
Less dividends: | ||||
From net investment income | (0.22 | ) | ||
Return of capital | (0.00 | )‡ | ||
|
| |||
Total dividends and distributions | (0.22 | ) | ||
|
| |||
Net asset value at end of period | $ | 8.66 | ||
|
| |||
Total investment return (b) | 0.54 | % | ||
Ratios (to average net assets)/Supplemental Data: | ||||
Net investment income (loss) | 3.18 | %†† | ||
Net expenses (excluding short sale expenses) (c) | 0.62 | %†† | ||
Expenses (before waiver/reimbursement) (c) | 0.85 | %†† | ||
Short sale expenses | 0.23 | % | ||
Portfolio turnover rate | 22 | % | ||
Net assets at end of period (in 000’s) | $ | 52,504 |
** | Inception date. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R6 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 31 |
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay Unconstrained Bond Fund (formerly known as MainStay Unconstrained Bond Fund) (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently offers nine classes of shares. Class A and Class B shares commenced operations on February 28, 1997. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Class R2 shares commenced operations on February 28, 2014. Class R3 shares commenced operations on February 29, 2016. Class R6 and Class T shares were registered for sale effective as of February 28, 2017. Class R6 shares commenced operations on February 28, 2018. As of October 31, 2018, Class T shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares purchased that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its
Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I, Class R2, Class R3 and Class R6 shares are offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T and Class R2 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee. Class R2 and Class R3 shares are subject to a shareholder service fee. This is in addition to any fees paid under a distribution plan, where applicable.
The Fund’s investment objective is to seek total return by investing primarily in domestic and foreign debt securities.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the
32 | MainStay MacKay Unconstrained Bond Fund |
“Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, a security that was fair valued in such a manner is shown in the Portfolio of Investments.
Equity securities and warrants are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each
33 |
Notes to Financial Statements (continued)
valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Certain securities held by the Fund may principally trade in foreign markets. Events may occur between the time the foreign markets close and the time at which the Fund’s NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or the Subadvisor conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee may, pursuant to procedures adopted by the Board, adjust the value of the local price to reflect the estimated impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, certain foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third-party vendor in accordance with valuation procedures adopted by the Board and are generally categorized as Level 2 in the hierarchy. As of October 31, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Foreign currency forward contracts are valued at their fair market values measured on the basis of the mean between the last current bid and ask prices based on dealer or exchange quotations and are generally categorized as Level 2 in the hierarchy.
Loan assignments, participations and commitments are valued at the average of bid quotations obtained from the engaged independent
pricing service and are generally categorized as Level 2 in the hierarchy. Certain loan assignments, participations and commitments may be valued by utilizing significant unobservable inputs obtained from the pricing service and are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
Swaps are marked to market daily based upon quotations from pricing agents, brokers or market makers. These securities are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or the Subadvisor determines the liquidity of the Fund’s investments; in doing so, the Manager or the Subadvisor may consider various factors, including: (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of October 31, 2018 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or
34 | MainStay MacKay Unconstrained Bond Fund |
instrument. As of October 31, 2018, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be reclaimable. The Fund will accrue such taxes and reclaims as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method and includes any realized gains and losses from repayments of principal on mortgage-backed securities. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may increase the costs of investing in mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund.
(I) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a specified future date and price, or to make or receive a cash payment based
35 |
Notes to Financial Statements (continued)
on the value of a financial instrument (e.g., foreign currency, interest rate, security or securities index). The Fund is subject to risks such as market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission merchant an amount of cash and/or U.S. government securities equal to a certain percentage of the collateral amount, known as the “initial margin.” During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The Fund agrees to receive from or pay to the broker or futures commission merchant an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the Fund’s involvement in open futures positions. There are several risks associated with the use of futures contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. The Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. The Fund may invest in futures contracts to help manage the duration and yield curve of the portfolio while minimizing the exposure to wider bid/ask spreads in traditional bonds. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAVs and may result in a loss to the Fund. As of October 31, 2018, open futures contracts are shown in the Portfolio of Investments.
(J) Loan Assignments, Participations and Commitments. The Fund may invest in loan assignments and participations (“loans”). Commitments are agreements to make money available to a borrower in a specified amount, at a specified rate and within a specified time. The Fund records an investment when the borrower withdraws money on a commitment or when a funded loan is purchased (trade date) and records interest as earned. These loans pay interest at rates that are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London Interbank Offered Rate (“LIBOR”).
The loans in which the Fund may invest are generally readily marketable, but may be subject to some restrictions on resale. For example, the Fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments. If the Fund purchases an assignment from a lender, the Fund will generally have direct contractual rights against the borrower in favor of the lender. If the Fund purchases a participation interest either from a lender or a participant, the Fund typically will have established a direct contractual relationship with the seller of the participation interest, but not with the borrower. Consequently, the Fund is subject to the credit risk of the lender or participant who sold the participation interest to the Fund, in addition to the usual credit risk of the borrower. In the event that the borrower, selling participant or intermediate participants become insolvent or enter into bankruptcy, the Fund may incur certain costs and delays in realizing payment, or may suffer a loss of principal and/or interest.
Unfunded commitments represent the remaining obligation of the Fund to the borrower. At any point in time, up to the maturity date of the issue, the borrower may demand the unfunded portion. Unfunded amounts, if any, are marked to market and any unrealized gains or losses are recorded in the Statement of Assets and Liabilities. As of October 31, 2018, the Fund did not hold any unfunded commitments.
(K) Swap Contracts. The Fund may enter into credit default, interest rate, equity, index and currency exchange rate swap contracts (“swaps”). In a typical swap transaction, two parties agree to exchange the future returns (or differentials in rates of future returns) earned or realized at periodic intervals on a particular investment or instrument based on a notional principal amount. Generally, the Fund will enter into a swap on a net basis, which means that the two payment streams under the swap are netted, with the Fund receiving or paying (as the case may be) only the net amount of the two payment streams. Therefore, the Fund’s current obligation under a swap generally will be equal to the net amount to be paid or received under the swap, based on the relative value of notional positions attributable to each counterparty to the swap. The payments may be adjusted for transaction costs, interest payments, the amount of interest paid on the investment or instrument or other factors. Collateral, in the form of cash or securities, may be required to be held in segregated accounts with the custodian bank or broker in accordance with the terms of the swap. Swap agreements are privately negotiated in the over the counter (“OTC”) market and may be executed in a multilateral or other trade facilities platform, such as a registered commodities exchange (“centrally cleared swaps”).
Certain standardized swaps, including certain credit default and interest rate swaps, are subject to mandatory clearing and exchange-trading, and more types of standardized swaps are expected to be subject to mandatory clearing and exchange-trading in the future. The counterparty risk for exchange-traded and cleared derivatives is expected to be generally lower than for uncleared derivatives, but cleared contracts are not risk-free. In a cleared derivative transaction, the Fund typically enters into the transaction with a financial institution counterparty, and performance of the transaction is effectively guaranteed by a central clearinghouse, thereby reducing or eliminating the Fund’s exposure to the credit risk of its original counterparty. The Fund will be required to post specified levels of margin with the clearinghouse or at the instruction of the clearinghouse; the margin required by a clearinghouse
36 | MainStay MacKay Unconstrained Bond Fund |
may be greater than the margin the Fund would be required to post in an uncleared transaction. As of October 31, 2018, all swap positions outstanding are shown in the Portfolio of Investments.
Swaps are marked to market daily based upon quotations from pricing agents, brokers or market makers and the change in value, if any, is recorded as unrealized appreciation or depreciation. Any payments made or received upon entering into a swap would be amortized or accreted over the life of the swap and recorded as a realized gain or loss. Early termination of a swap is recorded as a realized gain or loss. Daily changes in valuation of centrally cleared swaps, if any, are recorded as a receivable or payable for the change in value as appropriate (“variation margin”) on the Statement of Assets and Liabilities.
The Fund bears the risk of loss of the amount expected to be received under a swap in the event of the default or bankruptcy of the swap counterparty. The Fund may be able to eliminate its exposure under a swap either by assignment or other disposition, or by entering into an offsetting swap with the same party or a similar credit-worthy party. Swaps are not actively traded on financial markets. Entering into swaps involves elements of credit, market and documentation risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibilities that there will be no liquid market for these swaps, that the counterparty to the swaps may default on its obligation to perform or disagree as to the meaning of the contractual terms in the swaps and that there may be unfavorable changes in interest rates, the price of the index or the security underlying these transactions.
Interest Rate Swaps: An interest rate swap is an agreement between two parties where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often LIBOR). The Fund will typically use interest rate swaps to limit, or manage, its exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap.
Credit Default Swaps: The Fund may enter into credit default swaps to simulate long and short bond positions or to take an active long or short position with respect to the likelihood of a default or credit event by the issuer of the underlying reference obligation. The types of reference obligations underlying the swaps that may be entered into by the Fund include debt obligations of a single issuer of corporate or sovereign debt, a basket of obligations of different issuers or a credit index. A credit index is an equally-weighted credit default swap index that is designed to track a representative segment of the credit default swap market (e.g., investment grade, high volatility, below investment grade or emerging markets) and provides an investor with exposure to specific “baskets” of issuers of certain debt instruments. Index credit default swaps have standardized terms including a fixed spread and standard maturity dates. The composition of the obligations within a particular index changes periodically. Credit default swaps involve one party, the protection buyer, making a stream of payments to another party, the protection seller, in exchange for the right to receive a contingent payment if there is a credit event related to the underlying reference obligation. In the event that the reference obligation matures prior to the termination date of the contract, a similar security will be substituted for the duration of the contract term. Credit events are defined under individual swap agreements and generally include bankruptcy, failure to
pay, restructuring, repudiation/moratorium, obligation acceleration and obligation default. Selling protection effectively adds leverage to a portfolio up to the notional amount of the swap agreement. Potential liabilities under these contracts may be reduced by: the auction rates of the underlying reference obligations; upfront payments received at the inception of a swap; and net amounts received from credit default swaps purchased with the identical reference obligation.
(L) Foreign Currency Forward Contracts. The Fund may enter into foreign currency forward contracts, which are agreements to buy or sell foreign currencies on a specified future date at a specified rate. The Fund is subject to foreign currency exchange rate risk in the normal course of investing in these transactions. During the period the forward contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. Cash movement occurs on settlement date. When the forward contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract. The Fund may purchase and sell foreign currency forward contracts for purposes of seeking to enhance portfolio returns and manage portfolio risk more efficiently. Foreign currency forward contracts may also be used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. Foreign currency forward contracts to purchase or sell a foreign currency may also be used in anticipation of future purchases or sales of securities denominated in foreign currency, even if the specific investments have not yet been selected.
The use of foreign currency forward contracts involves, to varying degrees, elements of risk in excess of the amount recognized in the Statement of Assets and Liabilities, including counterparty risk, market risk and illiquidity risk. Counterparty risk is heightened for these instruments because foreign currency forward contracts are not exchange-traded and therefore no clearinghouse or exchange stands ready to meet the obligations under such contracts. Thus, the Fund faces the risk that its counterparties under such contracts may not perform their obligations. Market risk is the risk that the value of a foreign currency forward contract will depreciate due to unfavorable changes in exchange rates. Illiquidity risk arises because the secondary market for foreign currency forward contracts may have less liquidity relative to markets for other securities and financial instruments. Risks also arise from the possible movements in the foreign exchange rates underlying these instruments. While the Fund may enter into forward contracts to reduce currency exchange risks, changes in currency exchange rates may result in poorer overall performance for the Fund than if it had not engaged in such transactions. Exchange rate movements can be large, depending on the currency, and can last for extended periods of time, affecting the value of the Fund’s assets. Moreover, there may be an imperfect correlation between the Fund’s holdings of securities denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving the intended hedge or expose the Fund to the risk of currency exchange loss. The unrealized appreciation (depreciation) on forward contracts also reflects the Fund’s exposure at the valuation date to credit loss in the event of a counterparty’s failure to perform its obligations. As of October 31, 2018, open foreign currency forward contracts are shown in the Portfolio of Investments.
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Notes to Financial Statements (continued)
(M) Foreign Currency Transactions. The Fund’s books and records are maintained in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities— at the valuation date; and |
(ii) | purchases and sales of investment securities, income and expenses— at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(N) Rights and Warrants. Rights are certificates that permit the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. Warrants are instruments that entitle the holder to buy an equity security at a specific price for a specific period of time. These investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of these investments do not necessarily move in tandem with the prices of the underlying securities.
There is risk involved in the purchase of rights and warrants in that these investments are speculative investments. The Fund could also lose the entire value of its investment in warrants if such warrants are not exercised by the date of its expiration. The Fund is exposed to risk until the sale or exercise of each right or warrant is completed. As of October 31, 2018, the Fund did not hold any rights or warrants.
(O) Securities Sold Short. During the year ended October 31, 2018, the Fund engaged in sales of securities it did not own (“short sales”) as part of its investment strategies. When the Fund enters into a short sale, it must segregate or maintain with a broker the cash proceeds from the security sold short or other securities as collateral for its obligation to deliver the security upon conclusion of the sale. During the period a short position is open, depending on the nature and type of security, a short position is reflected as a liability and is marked to market in accordance with the valuation methodologies previously detailed (See Note 2(A)). Liabilities for securities sold short are closed out by purchasing the applicable securities for delivery to the counterparty broker. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited as to dollar amount, will be recognized upon termination of a short sale if the market price on the date the short position is closed out is less or greater, respectively, than the proceeds originally received. Any such gain or loss may be offset,
completely or in part, by the change in the value of the hedged investments. Interest on short positions held is accrued daily, while dividends declared on short positions existing on the record date are recorded on the ex-dividend date as a dividend expense in the Statement of Operations. Broker fees and other expenses related to securities sold short are disclosed in the Statement of Operations. Short sales involve risk of loss in excess of the related amounts reflected in the Statement of Assets and Liabilities.
(P) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. As of October 31, 2018, the Fund did not have any portfolio securities on loan.
(Q) Restricted Securities. Restricted securities, as disclosed in Note 5, are securities which have been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933, as amended. Disposal of these securities may involve time-consuming negotiations and expenses, and it may be difficult to obtain a prompt sale at an acceptable price.
(R) Debt and Foreign Securities Risk. The Fund primarily invests in high yield debt securities (commonly referred to as “junk bonds’’), which are considered speculative because they present a greater risk of loss, including default, than higher rated debt securities. These securities pay investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility. In times of unusual or adverse market, economic or political conditions, these securities may experience higher than normal default rates.
The Fund may invest in loans which are usually rated below investment grade and are generally considered speculative because they present a greater risk of loss, including default, than higher rated debt securities. These investments pay investors a higher interest rate than investment grade debt securities because of the increased risk of loss. Although certain loans are collateralized, there is no guarantee that the value of
38 | MainStay MacKay Unconstrained Bond Fund |
the collateral will be sufficient to repay the loan. In a recession or serious credit event, the value of these investments could decline significantly. As a result of these and other events, the Fund’s NAVs could go down and you could lose money.
In addition, loans generally are subject to the extended settlement periods that may be longer than seven days. As a result, the Fund may be adversely affected by selling other investments at an unfavorable time and/or under unfavorable conditions or engaging in borrowing transactions, such as borrowing against its credit facility, to raise cash to meet redemption obligations or pursue other investment opportunities.
In certain circumstances, loans may not be deemed to be securities. As a result, the Fund may not have the protection of anti-fraud provisions of the federal securities laws. In such cases, the Fund generally must rely on the contractual provisions in the loan agreement and common-law fraud protections under applicable state law.
The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. These risks include those resulting from currency fluctuations, future adverse political or economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
(S) Counterparty Credit Risk. In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains collateral posting terms and netting provisions. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a
particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels or if the Fund fails to meet the terms of its ISDA Master Agreements. The result would cause the Fund to accelerate payment of any net liability owed to the counterparty.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.
(T) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(U) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. The Fund entered into futures contracts to help manage the duration and yield curve positioning of the portfolio while minimizing the exposure to wider bid/ask spreads in traditional bonds. The Fund entered into interest rate and credit default swap contracts in order to obtain a desired return at a lower cost to the Fund, rather than directly investing in an instrument yielding that desired return or to hedge against credit and interest rate risk. The Fund also entered into foreign currency forward contracts to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. These derivatives are not accounted for as hedging instruments.
Fair value of derivative instruments as of October 31, 2018:
Asset Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized appreciation on investments, swap contracts and futures contracts (a) | $ | — | $ | — | $ | 803,689 | $ | 803,689 | |||||||||
Centrally Cleared Swap Contracts | Net Assets—Net unrealized appreciation on investments, swap contracts and futures contracts (b) | — | — | 5,175,152 | 5,175,152 | |||||||||||||
Forward Contracts | Unrealized appreciation on foreign currency forward contracts | 931,011 | — | — | 931,011 | |||||||||||||
|
| |||||||||||||||||
Total Fair Value | $ | 931,011 | $ | — | $ | 5,978,841 | $ | 6,909,852 | ||||||||||
|
|
39 |
Notes to Financial Statements (continued)
Liability Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized depreciation on investments, swap contracts and futures contracts (a) | $ | — | $ | — | $ | (339,691 | ) | $ | (339,691 | ) | |||||||
OTC Swap Contracts | Unrealized depreciation on OTC swap contracts | — | (88,088 | ) | — | (88,088 | ) | |||||||||||
Forward Contracts | Unrealized depreciation on foreign currency forward contracts | (79,300 | ) | — | — | (79,300 | ) | |||||||||||
|
| |||||||||||||||||
Total Fair Value | $ | (79,300 | ) | $ | (88,088 | ) | $ | (339,691 | ) | $ | (507,079 | ) | ||||||
|
|
(a) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
(b) | Includes cumulative appreciation (depreciation) of centrally cleared swap agreements as reported in the Portfolio of Investments. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2018:
Realized Gain (Loss)
Statement of Operations Location | Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | — | $ | — | $ | 10,333,129 | $ | 10,333,129 | |||||||||
Swap Contracts | Net realized gain (loss) on swap transactions | — | (168,650 | ) | 6,706,349 | 6,537,699 | ||||||||||||
Forward Contracts | Net realized gain (loss) on foreign currency forward transactions | 559,290 | — | — | 559,290 | |||||||||||||
|
| |||||||||||||||||
Total Realized Gain (Loss) | $ | 559,290 | $ | (168,650 | ) | $ | 17,039,478 | $ | 17,430,118 | |||||||||
|
|
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | — | $ | — | $ | (1,760,785 | ) | $ | (1,760,785 | ) | |||||||
Swap Contracts | Net change in unrealized appreciation (depreciation) on swap contracts | — | (38,361 | ) | 194,131 | 155,770 | ||||||||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | 1,054,807 | — | — | 1,054,807 | |||||||||||||
|
| |||||||||||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 1,054,807 | $ | (38,361 | ) | $ | (1,566,654 | ) | $ | (550,208 | ) | |||||||
|
|
Average Notional Amount
Foreign Exchange Contracts Risk | Credit Contracts Risk | Interest Rate Contracts Risk | Total | |||||||||||||
Futures Contracts Long | $ | — | $ | — | $ | 75,211,003 | $ | 75,211,003 | ||||||||
Futures Contracts Short | $ | — | $ | — | $ | (666,024,460 | ) | $ | (666,024,460 | ) | ||||||
Swap Contracts Long | $ | — | $ | 7,000,000 | $ | 937,333,333 | $ | 944,333,333 | ||||||||
Forward Contracts Long | $ | 11,649,741 | $ | — | $ | — | $ | 11,649,741 | ||||||||
Forward Contracts Short | $ | (38,005,842 | ) | $ | — | $ | — | $ | (38,005,842 | ) | ||||||
|
|
40 | MainStay MacKay Unconstrained Bond Fund |
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor’’), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.60% up to $500 million; 0.55% from $500 million to $1 billion; 0.50% from $1 billion to $5 billion; and 0.475% in excess of $5 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the year ended October 31, 2018, the effective management fee rate was 0.57%, inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
New York Life Investments has contractually agreed to waive fees and/ or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019 and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $7,224,495.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is
responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor’’), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans’’) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plan for the Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the year ended October 31, 2018, shareholder service fees incurred by the Fund were as follows:
Class R2 | $ | 2,253 | ||
Class R3 | 126 |
(C) Sales Charges. During the year ended October 31, 2018, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $32,990 and $6,973, respectively.
During the year ended October 31, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $12,160, $5, $22,546 and $5,229, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has
41 |
Notes to Financial Statements (continued)
entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 446,486 | ||
Investor Class | 39,817 | |||
Class B | 25,002 | |||
Class C | 280,980 | |||
Class I | 1,338,371 | |||
Class R2 | 3,946 | |||
Class R3 | 216 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the year ended October 31, 2018, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment | Value, Beginning of Year | Purchases at Cost | Proceeds from Sales | Net Realized Gain/ (Loss) on sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Year | Dividend Income | Other Distributions | Shares End of Year | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | — | $ | 131,259 | $ | (115,868 | ) | $ | — | $ | — | $ | 15,391 | $ | 186 | $ | — | 15,391 |
(G) Capital. As of October 31, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class R3 | $ | 28,528 | 15.0 | % | ||||
Class R6 | 25,062 | 0.0 | ‡ |
‡ | Less than one-tenth of a percent. |
Note 4–Federal Income Tax
As of October 31, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 1,172,637,217 | $ | 4,042,674 | $ | (24,418,302 | ) | $ | (20,375,628 | ) |
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary | Accumulated | Other Temporary Differences | Unrealized Appreciation (Depreciation) | Total Accumulated Gain (Loss) | ||||||||||
$— | $(175,122,155) | $ | (249,553 | ) | $ | (20,384,404 | ) | $ | (195,756,112 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily due to wash sale adjustments, mark to market of futures contracts, mark to market of foreign forward
contracts, swap adjustment, and straddle adjustments. The other temporary differences are primarily due to dividends payable.
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards of $175,122,155 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||||||||
Unlimited | $ | 21,994 | $ | 153,128 |
The Fund utilized $6,997,923 of capital loss carryforwards during the year ended October 31, 2018.
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 39,135,981 | $ | 48,450,079 | ||||
Return of Capital | 594,228 | 711,487 | ||||||
Total | $ | 39,730,209 | $ | 49,161,566 |
42 | MainStay MacKay Unconstrained Bond Fund |
Note 5–Restricted Securities
As of October 31, 2018, the Fund held the following restricted securitiy:
Security | Date(s) of Acquisition | Shares | Cost | 10/31/18 Value | Percent of Net Assets | |||||||||||||||
ION Media Networks, Inc. Common Stock | 3/11/14 | 22 | $ | — | $ | 13,625 | 0.0 | %‡ |
‡ | Less than one-tenth of a percent. |
Note 6–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to July 31, 2018, the aggregate commitment amount and the commitment fee were the same as those under the current Credit Agreement. During the year ended October 31, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the year ended October 31, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 9–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2018, purchases and sales of U.S. government securities were $1,098 and $-, respectively. Purchases and sales of securities, other than U.S. government securities and short-term securities, were $267,970 and $356,776, respectively.
Note 10–Capital Share Transactions
Class A | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 5,509,621 | $ | 48,680,334 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 858,927 | 7,531,280 | ||||||
Shares redeemed | (14,910,548 | ) | (131,326,039 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (8,542,000 | ) | (75,114,425 | ) | ||||
Shares converted into Class A (See Note 1) | 195,861 | 1,723,819 | ||||||
Shares converted from Class A (See Note 1) | (105,230 | ) | (923,908 | ) | ||||
|
| |||||||
Net increase (decrease) | (8,451,369 | ) | $ | (74,314,514 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 6,504,414 | $ | 57,344,117 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,221,667 | 10,741,115 | ||||||
Shares redeemed | (15,623,261 | ) | (137,648,462 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (7,897,180 | ) | (69,563,230 | ) | ||||
Shares converted into Class A (See Note 1) | 1,319,822 | 11,709,691 | ||||||
Shares converted from Class A (See Note 1) | (6,335,574 | ) | (55,695,953 | ) | ||||
|
| |||||||
Net increase (decrease) | (12,912,932 | ) | $ | (113,549,492 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 219,598 | $ | 1,946,265 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 70,481 | 622,644 | ||||||
Shares redeemed | (385,811 | ) | (3,420,155 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (95,732 | ) | (851,246 | ) | ||||
Shares converted into Investor Class (See Note 1) | 151,447 | 1,339,805 | ||||||
Shares converted from Investor Class (See Note 1) | (166,900 | ) | (1,481,104 | ) | ||||
|
| |||||||
Net increase (decrease) | (111,185 | ) | $ | (992,545 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 371,571 | $ | 3,304,500 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 115,291 | 1,021,772 | ||||||
Shares redeemed | (504,774 | ) | (4,488,274 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (17,912 | ) | (162,002 | ) | ||||
Shares converted into Investor Class (See Note 1) | 184,584 | 1,641,307 | ||||||
Shares converted from Investor Class (See Note 1) | (1,299,121 | ) | (11,617,639 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,132,449 | ) | $ | (10,138,334 | ) | |||
|
|
43 |
Notes to Financial Statements (continued)
Class B | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 23,856 | $ | 209,256 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 29,552 | 257,829 | ||||||
Shares redeemed | (406,416 | ) | (3,552,951 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (353,008 | ) | (3,085,866 | ) | ||||
Shares converted from Class B (See Note 1) | (86,222 | ) | (752,724 | ) | ||||
|
| |||||||
Net increase (decrease) | (439,230 | ) | $ | (3,838,590 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 89,558 | $ | 783,183 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 45,171 | 395,036 | ||||||
Shares redeemed | (421,641 | ) | (3,700,114 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (286,912 | ) | (2,521,895 | ) | ||||
Shares converted from Class B (See Note 1) | (83,048 | ) | (728,689 | ) | ||||
|
| |||||||
Net increase (decrease) | (369,960 | ) | $ | (3,250,584 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 928,440 | $ | 8,151,489 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 340,824 | 2,969,821 | ||||||
Shares redeemed | (5,286,485 | ) | (46,214,058 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (4,017,221 | ) | (35,092,748 | ) | ||||
Shares converted from Class C (See Note 1) | (6,738 | ) | (59,487 | ) | ||||
|
| |||||||
Net increase (decrease) | (4,023,959 | ) | $ | (35,152,235 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,690,444 | $ | 14,793,719 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 510,867 | 4,464,460 | ||||||
Shares redeemed | (8,433,451 | ) | (73,920,932 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (6,232,140 | ) | (54,662,753 | ) | ||||
Shares converted from Class C (See Note 1) | (1,494 | ) | (13,173 | ) | ||||
|
| |||||||
Net increase (decrease) | (6,233,634 | ) | $ | (54,675,926 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 28,233,057 | $ | 248,668,294 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,652,195 | 23,274,868 | ||||||
Shares redeemed | (36,010,371 | ) | (316,679,041 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (5,125,119 | ) | (44,735,879 | ) | ||||
Shares converted into Class I (See Note 1) | 17,412 | 153,599 | ||||||
Shares converted from Class I (See Note 1) | (6,069,494 | ) | (53,593,632 | ) | ||||
|
| |||||||
Net increase (decrease) | (11,177,201 | ) | $ | (98,175,912 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 29,685,612 | $ | 262,008,540 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,015,175 | 26,571,767 | ||||||
Shares redeemed | (28,317,188 | ) | (250,279,904 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 4,383,599 | 38,300,403 | ||||||
Shares converted into Class I (See Note 1) | 6,216,130 | 54,704,456 | ||||||
|
| |||||||
Net increase (decrease) | 10,599,729 | $ | 93,004,859 | |||||
|
| |||||||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 707,801 | $ | 6,174,706 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 8,998 | 78,427 | ||||||
Shares redeemed | (33,711 | ) | (294,004 | ) | ||||
|
| |||||||
Net increase (decrease) | 683,088 | $ | 5,959,129 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 19,091 | $ | 168,608 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,637 | 23,210 | ||||||
Shares redeemed | (10,063 | ) | (88,228 | ) | ||||
|
| |||||||
Net increase (decrease) | 11,665 | $ | 103,590 | |||||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 12,227 | $ | 106,756 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 373 | 3,270 | ||||||
Shares redeemed | (3,427 | ) | (29,943 | ) | ||||
|
| |||||||
Net increase (decrease) | 9,173 | $ | 80,083 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 10,579 | $ | 93,273 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 291 | 2,564 | ||||||
Shares redeemed | (1,643 | ) | (14,474 | ) | ||||
|
| |||||||
Net increase (decrease) | 9,227 | $ | 81,363 | |||||
|
| |||||||
44 | MainStay MacKay Unconstrained Bond Fund |
Class R6 | Shares | Amount | ||||||
Period ended October 31, 2018: | ||||||||
Shares sold | 372,589 | $ | 3,263,845 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 153,553 | 1,340,249 | ||||||
Shares redeemed | (532,263 | ) | (4,645,447 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (6,121 | ) | (41,353 | ) | ||||
Shares converted into Class R6 (See Note 1) | 6,069,494 | 53,593,632 | ||||||
|
| |||||||
Net increase (decrease) | 6,063,373 | $ | 53,552,279 | |||||
|
|
Note 11–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a
premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
Note 12–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
45 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The MainStay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MainStay MacKay Unconstrained Bond Fund (formerly, MainStay Unconstrained Bond Fund) (the Fund), one of the funds constituting The MainStay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years or periods in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years or periods in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians, the transfer agent, and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
46 | MainStay MacKay Unconstrained Bond Fund |
Federal Income Tax Information
(Unaudited)
For the fiscal year ended October 31, 2018, the Fund designated approximately $71,497 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
47 |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
48 | MainStay MacKay Unconstrained Bond Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
49 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
50 | MainStay MacKay Unconstrained Bond Fund |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
�� | * | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
51 |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1717044 MS293-18 | MSUB11-12/18 (NYLIM) NL217 |
MainStay MacKay Government Fund (Formerly known as MainStay Government Fund)
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception Date | One Year | Five Years | Ten Years | Gross Expense Ratio3 | ||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 1/3/1995 | | | –6.92 –2.54 | %
| | –0.13 0.80 | %
| | 2.02 2.49 | %
| | 1.00 1.00 | %
| |||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | –7.10 –2.72 |
| | –0.40 0.53 |
| | 1.81 2.28 |
| | 1.30 1.30 |
| |||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First | With sales charges Excluding sales charges | | 5/1/1986 | | | –8.22 –3.46 |
| | –0.60 –0.23 |
| | 1.51 1.51 |
| | 2.05 2.05 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 9/1/1998 | | | –4.42 –3.46 |
| | –0.23 –0.23 |
| | 1.51 1.51 |
| | 2.05 2.05 |
| |||||||
Class I Shares | No Sales Charge | 1/2/2004 | –2.26 | 1.06 | 2.77 | 0.75 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
Bloomberg Barclays U.S. Government Bond Index4 | –1.92 | % | 1.15 | % | 2.64 | % | ||||||
Morningstar Intermediate Government Category Average5 | –2.00 | 1.02 | 2.84 |
4. | The Bloomberg Barclays U.S. Government Bond Index is the Fund’s primary broad-based securities market index for comparison purposes. The Bloomberg Barclays U.S. Government Bond Index consists of publicly issued debt of the U.S. Treasury and government agencies. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | The Morningstar Intermediate Government Category Average is representative of funds that have at least 90% of their bond holdings in bonds backed by U.S. government or by U.S. government-linked agencies. These funds have durations between 3.5 and 6 years. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Government Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Government Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account on Hypothetical | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 994.40 | $ | 5.03 | $ | 1,020.16 | $ | 5.09 | 1.00% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 994.10 | $ | 6.63 | $ | 1,018.55 | $ | 6.72 | 1.32% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 990.30 | $ | 10.38 | $ | 1,014.77 | $ | 10.51 | 2.07% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 989.10 | $ | 10.38 | $ | 1,014.77 | $ | 10.51 | 2.07% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 995.70 | $ | 3.77 | $ | 1,021.43 | $ | 3.82 | 0.75% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of October 31, 2018 (Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories. The Fund’s portfolio is subject to change.
Top Ten Holdings as of October 31, 2018 (excluding short-term investments) (Unaudited)
1. | United States Treasury Notes, 2.375%, due 4/30/20 |
2. | Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities), 4.00%, due 11/1/41 |
3. | Tennessee Valley Authority, 4.65%, due 6/15/35 |
4. | Federal National Mortgage Association (Mortgage Pass-Through Securities), 4.50%, due 4/1/41 |
5. | United States Treasury Notes, 1.75%, due 9/30/22 |
6. | United States Treasury Notes, 2.875%, due 10/31/20 |
7. | Federal National Mortgage Association (Mortgage Pass-Through Securities), 5.50%, due 7/1/41 |
8. | United States Treasury Notes, 2.75%, due 4/30/23 |
9. | Federal National Mortgage Association (Mortgage Pass-Through Securities), 4.50%, due 2/1/41 |
10. | Government National Mortgage Association (Mortgage Pass-Through Securities), 4.00%, due 10/15/41 |
8 | MainStay MacKay Government Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, Louis N. Cohen, CFA,1 Steven H. Rich, PhD, Stephen R. Cianci, CFA, and Neil Moriarty, III, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Government Fund perform relative to its benchmark and peer group during the 12 months ended October 31, 2018?
For the 12 months ended October 31, 2018, Class I shares of MainStay MacKay Government Fund returned –2.26%, underperforming the –1.92% return of the Fund’s primary benchmark, the Bloomberg Barclays U.S. Government Bond Index. Over the same period, Class I shares underperformed the –2.00% return of the Morningstar Intermediate Government Category Average.2
What factors affected the Fund’s relative performance during the reporting period?
The four factors of duration,3 yield-curve4 posture, sector weighting and issue selection explain the Fund’s relative performance. Duration posture and yield advantage were the principal performance tailwinds relative to peers, while sector-weighting proved a relative headwind. Low turnover advantaged the Fund relative to peers by limiting transaction costs. We also preserved yield by avoiding large cash balances.
Duration and Yield-Curve Posture
U.S. Treasury yields rose across the yield curve, though less so in longer maturities. Higher rates in the short end of the yield curve were the market’s response to two effects: the policy committee of the Federal Reserve raising its federal funds target rate four times to forestall an overheated economy, and ballooning U.S. Treasury issuance funding the budget deficit. More modest increases in the long end reflect restrained inflation, trade policy in flux and aggregate demand failing to pressure resource capacity.
Against this backdrop, the Fund was less sensitive to changes in U.S. Treasury yields than the benchmark and longer-duration peers, because of its shorter duration. In turn, duration-posture advantaged the Fund. As the spread5 between the 2- and 30-year benchmark yields on the Treasury curve narrowed, the flatter curve benefited peer funds of comparable duration who were barbelled between the short and long ends of the yield curve and the hurt the Fund’s performance relative Bloomberg Barclays U.S. Government Bond Index.
Sector Weighting
Agency mortgage passthroughs6 are the largest class of securities in the Fund. Our commitment to agency mortgage passthroughs imparts a yield advantage over lower-yielding U.S. Treasury securities and agency debentures. This benefit was offset by the underperformance of agency mortgage-backed securities relative to comparable-duration U.S. Treasury securities. The Federal Reserve slowed the pace at which it reinvested principal runoff from its sizeable mortgage position, leaving a temporary imbalance between supply and demand. The lengthening of mortgage durations as U.S. Treasury yields rose also weighed on investor sentiment. The Bloomberg Barclays U.S. Government Bond Index, which holds no mortgage-backed securities, and peers with less exposure to the mortgage sector would have been advantaged relative to the Fund. This positioning detracted from the Fund’s relative performance during the reporting period.
The Fund’s mortgage allocation favors mortgage-backed securities issued by Fannie Mae and the Federal Home Loan Mortgage Corporation (FHLMC). Relative to peers, the Fund may be underweight Ginnie Mae issues. On the period’s outperformance of Fannie Mae and FHLMC issues, the Fund benefited relative to peers with larger Ginnie Mae commitments. Investors were unnerved by elevated prepayment speeds on Ginnie Mae securities, suggesting mortgage services might be churning their Ginnie Mae loan books. Faster prepayment rates hampered the returns of Ginnie Mae mortgage-backed securities because the majority of the Ginnie Mae universe was priced above par for the period and prepayments return principal to investors at par.
Ginnie Mae took steps in the spring of 2018 to reduce churn by ensuring borrowers are approached only when refinancing is of material benefit. By slowing the pace at which Ginnie Mae borrowers refinance, this policy initiative improved the prospects for the Ginnie Mae sector and, as a result, Ginnie Mae outperformed Fannie Mae and FHLMC issues in the second half of the period. The Fund would have lagged peers with higher Ginnie Mae exposure in this time frame.
1 | Louis Cohen will serve as a portfolio manager of the Fund until on or about December 31, 2018. |
2. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
3. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
4. | The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting. |
5. | The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The term may also refer to the difference in yield between two specific securities or types of securities at a given time. |
6. | Mortgage passthrough securities consist of a pool of residential mortgage loans in which homeowners’ monthly payments of principal, interest and prepayments pass from the original bank through a government agency or an investment bank to investors. |
9 |
Issue Selection
Our willingness to emphasize 30-year loan terms over shorter (15- and 20-year) loan terms, had mixed results relative to peers and detracted from performance relative to the Bloomberg Barclays U.S. Government Bond Index. More sensitive to a flatter U.S. Treasury yield curve (due to their wider cash-flow windows as the long loan term expands the window over which borrowers may prepay), 30-year loan terms tend to outperform. However, when the flatter curve coincides with rising Treasury yields, the benefits of the wider-window cash flows can be offset by the longer duration of the 30-year loans.
We also favored seasoned loans (i.e., loans originated in prior years) and low-balance loans. Mortgage passthroughs collateralized by loans with these characteristics often have more stable cash-flow profiles. As higher mortgage rates moderated refinanceability and higher Treasury rates pressured security prices, the return impact of prepayments was not as extreme as in prior periods. This dynamic led the market to recalibrate the worth of cash-flow stability, causing payups for seasoning and loan balance to decline.
Due to scarcity value and their shorter duration, higher-coupon mortgage passthroughs performed best within our residential mortgage-backed holdings.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay Government Fund was renamed MainStay MacKay Government Fund. For more information on this change, please refer to the supplement dated December 15, 2017. Effective October 18, 2018, Stephen Cianci and Neil Moriarty were added as portfolio managers of the Fund. For more information on this change, refer to the supplement dated October 18, 2018.
What was the Fund’s duration strategy during the reporting period?
The Fund’s duration contracted from 4.6 to 4.45 years during the period, while the benchmark’s duration shortened from 5.9 to 5.8 years. We maintained the Fund’s duration shorter than the benchmark to buffer the Fund against higher U.S. Treasury yields. The 0.15-year contraction of the Fund’s duration is explained by our swapping mortgage-backed securities into Treasury notes of shorter duration.
What were some of the Fund’s largest purchases and sales during the reporting period?
As U.S. Treasury yields on the short end of the curve became more attractive in the latter third of the period, we rotated one-quarter of our agency mortgage passthroughs into Treasury securities of shorter duration. The trade better diversified the Fund’s holdings and also enabled us to shorten the Fund’s duration.
How did the Fund’s sector weightings change during the reporting period?
Aside from the rotation trade outlined above, weightings remained stable during the period.
How was the Fund positioned at the end of the reporting period?
Relative to the Bloomberg Barclays U.S. Government Bond Index, MainStay MacKay Government Fund ended the period underweight U.S. Treasury securities, and overweight agency mortgage passthroughs and agency debentures. The Fund also holds modest overweights in asset-backed securities and commercial mortgage-backed securities; collectively, the non-government exposure is roughly 5% of net assets. The Fund ended the period with approximately 5% of net assets in cash or cash equivalents.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay MacKay Government Fund |
Portfolio of Investments October 31, 2018
Principal Amount | Value | |||||||
Long-Term Bonds 95.2%† Asset-Backed Securities 1.3% |
| |||||||
Other Asset-Backed Securities 0.3% |
| |||||||
Small Business Administration Participation Certificates | $ | 261,636 | $ | 255,184 | ||||
|
| |||||||
Utilities 1.0% |
| |||||||
Atlantic City Electric Transition Funding LLC | 1,008,883 | 1,045,866 | ||||||
|
| |||||||
Total Asset-Backed Securities | 1,301,050 | |||||||
|
| |||||||
Corporate Bonds 1.0% |
| |||||||
Electric 1.0% |
| |||||||
Duke Energy Florida Project Finance LLC | 1,100,000 | 1,010,218 | ||||||
|
| |||||||
Total Corporate Bonds | 1,010,218 | |||||||
|
| |||||||
Mortgage-Backed Securities 2.4% |
| |||||||
Commercial Mortgage Loans |
| |||||||
BXP Trust | 1,055,000 | 1,007,310 | ||||||
Four Times Square Trust | 592,986 | 614,465 | ||||||
|
| |||||||
1,621,775 | ||||||||
|
| |||||||
Residential Mortgages |
| |||||||
Citigroup Mortgage Loan Trust, Inc. | 126,662 | 117,714 | ||||||
Mortgage Equity Conversion Asset Trust | 875,704 | 816,243 | ||||||
|
| |||||||
933,957 | ||||||||
|
| |||||||
Total Mortgage-Backed Securities | 2,555,732 | |||||||
|
|
Principal Amount | Value | |||||||
U.S. Government & Federal Agencies 90.5% |
| |||||||
Fannie Mae Strip (Collateralized Mortgage Obligations) 0.0%‡ (g) |
| |||||||
Series 360, Class 2, IO | $ | 127,294 | $ | 28,806 | ||||
Series 361, Class 2, IO | 26,372 | 6,419 | ||||||
|
| |||||||
35,225 | ||||||||
|
| |||||||
Federal Home Loan Mortgage Corporation |
| |||||||
2.50%, due 8/1/46 | 1,080,844 | 988,897 | ||||||
3.50%, due 4/1/42 | 694,401 | 682,124 | ||||||
3.50%, due 5/1/42 | 538,000 | 528,516 | ||||||
3.50%, due 8/1/43 | 758,878 | 745,228 | ||||||
3.624% (1 Year Treasury Constant Maturity Rate + 2.25%), due 2/1/37 (c) | 26,712 | 28,101 | ||||||
3.673% (12 Month LIBOR + 1.625%), due 3/1/35 (c) | 19,389 | 20,197 | ||||||
4.00%, due 8/1/39 | 172,321 | 173,063 | ||||||
4.00%, due 12/1/40 | 89,703 | 90,508 | ||||||
4.00%, due 2/1/41 | 1,041,289 | 1,050,644 | ||||||
4.00%, due 4/1/41 | 333,475 | 336,468 | ||||||
4.00%, due 11/1/41 | 7,350,000 | 7,416,174 | ||||||
4.00%, due 11/1/43 | 160,721 | 161,422 | ||||||
4.00%, due 8/1/44 | 1,831,624 | 1,848,038 | ||||||
4.00%, due 3/1/46 | 840,604 | 842,194 | ||||||
4.349% (1 Year Treasury Constant Maturity Rate + 2.25%), due 6/1/35 (c) | 75,807 | 79,820 | ||||||
4.50%, due 3/1/41 | 417,518 | 432,315 | ||||||
4.50%, due 8/1/41 | 644,875 | 668,236 | ||||||
5.00%, due 6/1/33 | 263,564 | 278,954 | ||||||
5.00%, due 8/1/33 | 219,508 | 232,362 | ||||||
5.00%, due 5/1/36 | 236,505 | 250,154 | ||||||
5.00%, due 10/1/39 | 564,516 | 597,860 | ||||||
6.50%, due 4/1/37 | 53,250 | 59,235 | ||||||
|
| |||||||
17,510,510 | ||||||||
|
| |||||||
Federal National Mortgage Association |
| |||||||
2.50%, due 2/1/43 | 710,910 | 653,316 | ||||||
3.00%, due 10/1/32 | 652,859 | 634,565 | ||||||
3.00%, due 9/1/46 | 2,094,805 | 1,978,498 | ||||||
3.00%, due 10/1/46 | 1,635,015 | 1,544,131 | ||||||
3.00%, due 2/1/57 | 899,917 | 843,209 | ||||||
3.50%, due 7/1/43 | 365,581 | 359,144 | ||||||
3.928% (6 Month LIBOR + 1.545%), due 11/1/34 (c) | 63,243 | 65,247 | ||||||
3.965% (12 Month LIBOR + 1.576%), due 4/1/34 (c) | 155,165 | 163,891 | ||||||
4.00%, due 8/1/38 | 1,045,133 | 1,058,331 | ||||||
4.00%, due 2/1/41 | 553,760 | 558,300 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Federal National Mortgage Association |
| |||||||
4.00%, due 11/1/43 | $ | 1,892,040 | $ | 1,919,844 | ||||
4.00%, due 1/1/46 | 310,000 | 312,268 | ||||||
4.50%, due 6/1/39 | 430,105 | 445,419 | ||||||
4.50%, due 12/1/40 | 1,312,202 | 1,359,389 | ||||||
4.50%, due 2/1/41 | 3,094,621 | 3,213,098 | ||||||
4.50%, due 4/1/41 | 4,711,422 | 4,902,175 | ||||||
4.50%, due 8/1/42 | 530,000 | 549,499 | ||||||
4.50%, due 12/1/43 | 305,535 | 314,636 | ||||||
5.00%, due 3/1/40 | 675,152 | 713,979 | ||||||
5.00%, due 2/1/41 | 1,463,137 | 1,553,197 | ||||||
5.00%, due 10/1/41 | 1,406,817 | 1,487,756 | ||||||
5.50%, due 7/1/41 | 4,180,000 | 4,486,294 | ||||||
6.00%, due 11/1/32 | 143,337 | 156,495 | ||||||
6.00%, due 1/1/33 | 100,684 | 109,679 | ||||||
6.00%, due 3/1/33 | 97,738 | 104,978 | ||||||
6.00%, due 9/1/34 | 37,642 | 40,653 | ||||||
6.00%, due 9/1/35 | 367,462 | 404,637 | ||||||
6.00%, due 10/1/35 | 170,110 | 187,032 | ||||||
6.00%, due 6/1/36 | 92,458 | 100,653 | ||||||
6.00%, due 11/1/36 | 152,412 | 164,512 | ||||||
6.00%, due 4/1/37 | 17,659 | 18,288 | ||||||
6.50%, due 10/1/31 | 85,118 | 93,721 | ||||||
6.50%, due 2/1/37 | 22,541 | 24,546 | ||||||
|
| |||||||
30,521,380 | ||||||||
|
| |||||||
Government National Mortgage Association |
| |||||||
3.00%, due 6/20/46 | 703,657 | 667,204 | ||||||
3.50%, due 12/20/46 | 1,386,890 | 1,364,298 | ||||||
4.00%, due 7/15/39 | 248,075 | 249,758 | ||||||
4.00%, due 9/20/40 | 1,097,692 | 1,112,438 | ||||||
4.00%, due 11/20/40 | 207,029 | 209,828 | ||||||
4.00%, due 1/15/41 | 1,147,192 | 1,162,066 | ||||||
4.00%, due 10/15/41 | 2,776,107 | 2,815,448 | ||||||
4.00%, due 6/20/47 | 900,260 | 896,691 | ||||||
4.50%, due 5/20/40 | 1,011,747 | 1,052,651 | ||||||
5.00%, due 2/20/41 | 243,768 | 257,541 | ||||||
6.00%, due 8/15/32 | 220,938 | 239,822 | ||||||
6.00%, due 12/15/32 | 89,602 | 95,979 | ||||||
6.50%, due 8/15/28 | 81,463 | 88,833 | ||||||
6.50%, due 4/15/31 | 216,504 | 240,597 | ||||||
|
| |||||||
10,453,154 | ||||||||
|
| |||||||
Overseas Private Investment Corporation 1.5% |
| |||||||
Overseas Private Investment Corporation | 1,526,144 | 1,599,899 | ||||||
|
| |||||||
Tennessee Valley Authority 5.9% |
| |||||||
Tennessee Valley Authority | 5,605,000 | 6,151,061 | ||||||
|
|
Principal Amount | Value | |||||||
United States Treasury Notes 27.5% |
| |||||||
1.75%, due 9/30/22 | $ | 5,000,000 | $ | 4,775,000 | ||||
2.25%, due 11/15/24 | 2,160,000 | 2,065,078 | ||||||
2.375%, due 4/30/20 | 10,000,000 | 9,932,812 | ||||||
2.625%, due 7/31/20 | 2,665,000 | 2,654,173 | ||||||
2.75%, due 4/30/23 | 4,200,000 | 4,160,133 | ||||||
2.75%, due 7/31/23 | 530,000 | 524,514 | ||||||
2.75%, due 8/31/23 | 250,000 | 247,471 | ||||||
2.875%, due 10/31/20 | 4,535,000 | 4,534,646 | ||||||
|
| |||||||
28,893,827 | ||||||||
|
| |||||||
Total U.S. Government & Federal Agencies | 95,165,056 | |||||||
|
| |||||||
Total Long-Term Bonds | 100,032,056 | |||||||
|
| |||||||
Shares | ||||||||
Short-Term Investments 4.7% |
| |||||||
Affiliated Investment Company 1.7% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.075% (h) | 1,801,463 | 1,801,463 | ||||||
|
| |||||||
Total Affiliated Investment Company | 1,801,463 | |||||||
|
| |||||||
Principal Amount | ||||||||
U.S. Governments 3.0% (i) |
| |||||||
United States Treasury Bills | ||||||||
2.28%, due 1/10/19 | $ | 1,700,000 | 1,692,658 | |||||
2.283%, due 1/10/19 | 1,500,000 | 1,493,521 | ||||||
|
| |||||||
Total U.S. Governments | 3,186,179 | |||||||
|
| |||||||
Total Short-Term Investments | 4,987,642 | |||||||
|
| |||||||
Total Investments | 99.9 | % | 105,019,698 | |||||
Other Assets, Less Liabilities | 0.1 | 100,193 | ||||||
Net Assets | 100.0 | % | $ | 105,119,891 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(b) | Collateral strip rate—A bond whose interest was based on the weighted net interest rate of the collateral. The coupon rate adjusts periodically based on a predetermined schedule. Rate shown was the rate in effect as of October 31, 2018. |
12 | MainStay MacKay Government Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
(c) | Floating rate—Rate shown was the rate in effect as of October 31, 2018. |
(d) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(e) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of October 31, 2018, the total market value of the fair valued security was $816,243, which represented 0.8% of the Fund’s net assets. |
(f) | Illiquid security—As of October 31, 2018, the total market value of the security deemed illiquid under procedures approved by the Board of Trustees was $816,243, which represented 0.8% of the Fund’s net assets. (Unaudited) |
(g) | Collateralized Mortgage Obligation Interest Only Strip—Pays a fixed or variable rate of interest based on mortgage loans or mortgage pass-through securities. The principal amount of the underlying pool represents the notional amount on which the current interest was calculated. The value of these stripped securities may be particularly sensitive to changes in prevailing interest rates and are typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities. |
(h) | Current yield as of October 31, 2018. |
(i) | Interest rate shown represents yield to maturity. |
The following abbreviations are used in the preceding pages:
IO—Interest Only
LIBOR—London Interbank Offered Rate
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets:
Asset Valuation Inputs
Description | Quoted Active Assets | Significant Other Inputs (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | �� | |||||||||||||||
Asset-Backed Securities | $ | — | $ | 1,301,050 | $ | — | $ | 1,301,050 | ||||||||
Corporate Bonds | — | 1,010,218 | — | 1,010,218 | ||||||||||||
Mortgage-Backed Securities (b) | — | 1,739,489 | 816,243 | 2,555,732 | ||||||||||||
U.S. Government & Federal Agencies | — | 95,165,056 | — | 95,165,056 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 99,215,813 | 816,243 | 100,032,056 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Short-Term Investments | ||||||||||||||||
Affiliated Investment Company | 1,801,463 | — | — | 1,801,463 | ||||||||||||
U.S. Governments | — | 3,186,179 | — | 3,186,179 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Short-Term Investments | 1,801,463 | 3,186,179 | — | 4,987,642 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 1,801,463 | $ | 102,401,992 | $ | 816,243 | $ | 105,019,698 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $816,243 is held in Residential Mortgages (Collateralized Mortgage Obligations) within the Mortgage-Backed Securities section of the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments October 31, 2018 (continued)
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments in Securities | Balance as of October 31, 2017 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales (a) | Transfers into Level 3 | Transfers out of Level 3 | Balance as of October 31, 2018 | Change in Unrealized Appreciation (Depreciation) from Investments Still Held at October 31, 2018 (b) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Mortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||||||
Residential Mortgages (Collateralized Mortgage Obligations) | $ | 835,554 | $ | 558 | $ | 3,217 | $ | 81,246 | $ | — | $ | (104,332 | ) | $ | — | $ | — | $ | 816,243 | $ | 71,146 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 835,554 | $ | 558 | $ | 3,217 | $ | 81,246 | $ | — | $ | (104,332 | ) | $ | — | $ | — | $ | 816,243 | $ | 71,146 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Sales include principal reductions. |
(b) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
14 | MainStay MacKay Government Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2018
Assets | ||||
Investment in securities, at value | $ | 103,218,235 | ||
Investment in affiliated investment companies, at value (identified cost $1,801,463) | 1,801,463 | |||
Receivables: | ||||
Dividends and interest | 395,610 | |||
Fund shares sold | 9,766 | |||
Investment securities sold | 3,735 | |||
Other assets | 30,704 | |||
|
| |||
Total assets | 105,459,513 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 184,554 | |||
Transfer agent (See Note 3) | 43,483 | |||
Manager (See Note 3) | 40,091 | |||
NYLIFE Distributors (See Note 3) | 27,817 | |||
Shareholder communication | 13,746 | |||
Custodian | 5,459 | |||
Professional fees | 4,948 | |||
Trustees | 274 | |||
Accrued expenses | 4,376 | |||
Dividend payable | 14,874 | |||
|
| |||
Total liabilities | 339,622 | |||
|
| |||
Net assets | $ | 105,119,891 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 132,297 | ||
Additional paid-in capital | 108,176,375 | |||
|
| |||
108,308,672 | ||||
Total distributable earnings (loss) | (3,188,781 | ) | ||
|
| |||
Net assets | $ | 105,119,891 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 68,269,232 | ||
|
| |||
Shares of beneficial interest outstanding | 8,603,754 | |||
|
| |||
Net asset value per share outstanding | $ | 7.93 | ||
Maximum sales charge (4.50% of offering price) | 0.37 | |||
|
| |||
Maximum offering price per share outstanding | $ | 8.30 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 21,011,565 | ||
|
| |||
Shares of beneficial interest outstanding | 2,636,571 | |||
|
| |||
Net asset value per share outstanding | $ | 7.97 | ||
Maximum sales charge (4.50% of offering price) | 0.38 | |||
|
| |||
Maximum offering price per share outstanding | $ | 8.35 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 3,224,330 | ||
|
| |||
Shares of beneficial interest outstanding | 406,243 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 7.94 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 7,611,647 | ||
|
| |||
Shares of beneficial interest outstanding | 959,484 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 7.93 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 5,003,117 | ||
|
| |||
Shares of beneficial interest outstanding | 623,629 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.02 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 3,791,483 | ||
Dividend distributions from affiliated investment companies | 18,781 | |||
Other | 381 | |||
|
| |||
Total income | 3,810,645 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 575,965 | |||
Distribution/Service—Class A (See Note 3) | 186,899 | |||
Distribution/Service—Investor Class (See Note 3) | 56,306 | |||
Distribution/Service—Class B (See Note 3) | 39,567 | |||
Distribution/Service—Class C (See Note 3) | 79,940 | |||
Transfer agent (See Note 3) | 268,302 | |||
Registration | 79,914 | |||
Professional fees | 67,007 | |||
Shareholder communication | 31,182 | |||
Custodian | 9,898 | |||
Trustees | 2,531 | |||
Miscellaneous | 11,484 | |||
|
| |||
Total expenses before waiver/reimbursement | 1,408,995 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (70,447 | ) | ||
|
| |||
Net expenses | 1,338,548 | |||
|
| |||
Net investment income (loss) | 2,472,097 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments |
| |||
Net realized gain (loss) on investments | (1,466,663 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (4,072,054 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments | (5,538,717 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (3,066,620 | ) | |
|
|
16 | MainStay MacKay Government Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 2,472,097 | $ | 2,683,030 | ||||
Net realized gain (loss) on investments | (1,466,663 | ) | (609,487 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (4,072,054 | ) | (3,841,831 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (3,066,620 | ) | (1,768,288 | ) | ||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (1,745,008 | ) | ||||||
Investor Class | (451,882 | ) | ||||||
Class B | (49,618 | ) | ||||||
Class C | (101,506 | ) | ||||||
Class I | (152,092 | ) | ||||||
|
| |||||||
(2,500,106 | ) | |||||||
|
| |||||||
Dividends to shareholders from net investment income: | ||||||||
Class A | (1,689,227 | ) | ||||||
Investor Class | (634,565 | ) | ||||||
Class B | (58,276 | ) | ||||||
Class C | (129,650 | ) | ||||||
Class I | (224,077 | ) | ||||||
|
| |||||||
(2,735,795 | ) | |||||||
|
| |||||||
Total dividends and distributions to shareholders | (2,500,106 | ) | (2,735,795 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 5,392,265 | 27,812,690 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 2,316,879 | 2,523,795 | ||||||
Cost of shares redeemed | (25,167,407 | ) | (71,575,286 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (17,458,263 | ) | (41,238,801 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (23,024,989 | ) | (45,742,884 | ) | ||||
Net Assets | ||||||||
Beginning of year | 128,144,880 | 173,887,764 | ||||||
|
| |||||||
End of year(2) | $ | 105,119,891 | $ | 128,144,880 | ||||
|
|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $28,789 in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | $ | 8.57 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.19 | 0.17 | 0.17 | 0.20 | 0.21 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.40 | ) | (0.22 | ) | 0.05 | (0.10 | ) | 0.08 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.21 | ) | (0.05 | ) | 0.22 | 0.10 | 0.29 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.19 | ) | (0.18 | ) | (0.17 | ) | (0.20 | ) | (0.21 | ) | ||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | (0.02 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.19 | ) | (0.18 | ) | (0.17 | ) | (0.22 | ) | (0.23 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 7.93 | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (2.54 | %) | (0.60 | %) | 2.60 | % | 1.17 | % | 3.46 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.31 | % | 2.07 | % | 1.99 | %(c) | 2.38 | % | 2.47 | % | ||||||||||
Net expenses (d) | 1.00 | % | 1.00 | % | 0.98 | %(e) | 1.00 | % | 0.98 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.04 | % | 1.00 | % | 0.99 | % | 1.00 | % | 0.98 | % | ||||||||||
Portfolio turnover rate (f) | 58 | % | 20 | % | 41 | % | 13 | % | 14 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 68,269 | $ | 82,828 | $ | 93,242 | $ | 90,119 | $ | 100,212 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.98%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 0.99%. |
(f) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 6% and 16% for the years ended October 31, 2018, 2017 and 2016, respectively. |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.36 | $ | 8.59 | $ | 8.54 | $ | 8.66 | $ | 8.60 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.16 | 0.15 | 0.15 | 0.18 | 0.19 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.39 | ) | (0.23 | ) | 0.05 | (0.10 | ) | 0.08 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.23 | ) | (0.08 | ) | 0.20 | 0.08 | 0.27 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.16 | ) | (0.15 | ) | (0.15 | ) | (0.18 | ) | (0.19 | ) | ||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | (0.02 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.16 | ) | (0.15 | ) | (0.15 | ) | (0.20 | ) | (0.21 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 7.97 | $ | 8.36 | $ | 8.59 | $ | 8.54 | $ | 8.66 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (2.72 | %) | (0.91 | %) | 2.34 | % | 0.88 | % | 3.15 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.98 | % | 1.77 | % | 1.74 | %(c) | 2.11 | % | 2.19 | % | ||||||||||
Net expenses (d) | 1.33 | % | 1.30 | % | 1.23 | %(e) | 1.28 | % | 1.26 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.44 | % | 1.30 | % | 1.24 | % | 1.28 | % | 1.26 | % | ||||||||||
Portfolio turnover rate (f) | 58 | % | 20 | % | 41 | % | 13 | % | 14 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 21,012 | $ | 24,187 | $ | 40,094 | $ | 42,444 | $ | 45,947 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.73%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.24%. |
(f) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 6% and 16% for the years ended October 31, 2018, 2017 and 2016, respectively. |
18 | MainStay MacKay Government Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | $ | 8.57 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.10 | 0.08 | 0.08 | 0.12 | 0.12 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.39 | ) | (0.22 | ) | 0.05 | (0.10 | ) | 0.08 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.29 | ) | (0.14 | ) | 0.13 | 0.02 | 0.20 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.10 | ) | (0.09 | ) | (0.08 | ) | (0.12 | ) | (0.12 | ) | ||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | (0.02 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.10 | ) | (0.09 | ) | (0.08 | ) | (0.14 | ) | (0.14 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 7.94 | $ | 8.33 | $ | 8.56 | $ | 8.51 | $ | 8.63 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (3.46 | %) | (1.66 | %) | 1.59 | % | 0.14 | % | 2.38 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.23 | % | 1.01 | % | 0.99 | %(c) | 1.35 | % | 1.44 | % | ||||||||||
Net expenses (d) | 2.08 | % | 2.05 | % | 1.98 | %(e) | 2.03 | % | 2.01 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 2.19 | % | 2.05 | % | 1.99 | % | 2.03 | % | 2.01 | % | ||||||||||
Portfolio turnover rate (f) | 58 | % | 20 | % | 41 | % | 13 | % | 14 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 3,224 | $ | 4,730 | $ | 7,154 | $ | 8,363 | $ | 10,550 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.98%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.99%. |
(f) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 6% and 16% for the years ended October 31, 2018, 2017 and 2016, respectively. |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.32 | $ | 8.55 | $ | 8.50 | $ | 8.62 | $ | 8.56 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.10 | 0.08 | 0.08 | 0.12 | 0.12 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.39 | ) | (0.22 | ) | 0.05 | (0.10 | ) | 0.08 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.29 | ) | (0.14 | ) | 0.13 | 0.02 | 0.20 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.10 | ) | (0.09 | ) | (0.08 | ) | (0.12 | ) | (0.12 | ) | ||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | (0.02 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.10 | ) | (0.09 | ) | (0.08 | ) | (0.14 | ) | (0.14 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 7.93 | $ | 8.32 | $ | 8.55 | $ | 8.50 | $ | 8.62 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (3.46 | %) | (1.66 | %) | 1.59 | % | 0.14 | % | 2.39 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.23 | % | 1.00 | % | 0.99 | %(c) | 1.34 | % | 1.44 | % | ||||||||||
Net expenses (d) | 2.08 | % | 2.05 | % | 1.98 | %(e) | 2.03 | % | 2.01 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 2.19 | % | 2.05 | % | 1.99 | % | 2.03 | % | 2.01 | % | ||||||||||
Portfolio turnover rate (f) | 58 | % | 20 | % | 41 | % | 13 | % | 14 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 7,612 | $ | 9,472 | $ | 19,338 | $ | 17,073 | $ | 11,226 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.98%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.99%. |
(f) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 6% and 16% for the years ended October 31, 2018, 2017 and 2016, respectively. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class I | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.42 | $ | 8.64 | $ | 8.59 | $ | 8.71 | $ | 8.65 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.21 | 0.20 | 0.19 | 0.22 | 0.23 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.40 | ) | (0.22 | ) | 0.05 | (0.09 | ) | 0.09 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.19 | ) | (0.02 | ) | 0.24 | 0.13 | 0.32 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.21 | ) | (0.20 | ) | (0.19 | ) | (0.23 | ) | (0.24 | ) | ||||||||||
From net realized gain on investments | — | — | — | (0.02 | ) | (0.02 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.21 | ) | (0.20 | ) | (0.19 | ) | (0.25 | ) | (0.26 | ) | ||||||||||
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Net asset value at end of year | $ | 8.02 | $ | 8.42 | $ | 8.64 | $ | 8.59 | $ | 8.71 | ||||||||||
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Total investment return (b) | (2.26 | %) | (0.23 | %) | 2.83 | % | 1.41 | % | 3.69 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.56 | % | 2.33 | % | 2.16 | %(c) | 2.57 | % | 2.70 | % | ||||||||||
Net expenses (d) | 0.75 | % | 0.75 | % | 0.73 | %(e) | 0.75 | % | 0.73 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 0.79 | % | 0.75 | % | 0.74 | % | 0.75 | % | 0.73 | % | ||||||||||
Portfolio turnover rate (f) | 58 | % | 20 | % | 41 | % | 13 | % | 14 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 5,003 | $ | 6,926 | $ | 14,061 | $ | 4,492 | $ | 10,020 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 2.15%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 0.74%. |
(f) | The portfolio turnover rates not including mortgage dollar rolls were 52%, 6% and 16% for the years ended October 31, 2018, 2017 and 2016, respectively. |
20 | MainStay MacKay Government Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay Government Fund (formerly known as MainStay Government Fund) (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has seven classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Class R6 and Class T shares were registered for sale effective as of February 28, 2017. As of October 31, 2018, Class R6 and Class T shares were not yet offered for sale. Investor Class shares commenced operations on February 28, 2008. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I shares
are offered at NAV without a sales charge. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class and Class T shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek current income.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to
21 |
Notes to Financial Statements (continued)
oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker / dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids / offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, a security that was fair valued in such a manner is shown in the Portfolio of Investments.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of
22 | MainStay MacKay Government Fund |
convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the
Fund. Under the supervision of the Board, the Manager or the Subadvisor determine the liquidity of the Fund’s investments; in doing so, the Manager or the Subadvisor may consider various factors, including (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of October 31, 2018 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of October 31, 2018, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Interest income is accrued as earned using the effective interest rate method and includes any realized gains and losses from repayments of principal on mortgage-backed securities. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities.
23 |
Notes to Financial Statements (continued)
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may increase the costs of investing in mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized
loss to the Fund. As of October 31, 2018, the Fund did not hold any repurchase agreements.
(H) Dollar Rolls. The Fund may enter into dollar roll transactions in which it sells mortgage-backed securities (“MBS”) from its portfolio to a counterparty from whom it simultaneously agrees to buy a similar security on a delayed delivery basis. The Fund generally transfers MBS where the MBS are “to be announced,” therefore, the Fund accounts for these transactions as purchases and sales.
The securities sold in connection with the dollar rolls are removed from the portfolio and a realized gain or loss is recognized. The securities the Fund has agreed to acquire are included at market value in the Portfolio of Investments and liabilities for such purchase commitments are included as payables for investments purchased. During the roll period, the Fund foregoes principal and interest paid on the securities. The Fund is compensated by the difference between the current sales price and the forward price for the future as well as by the earnings on the cash proceeds of the initial sale. Dollar rolls may be renewed without physical delivery of the securities subject to the contract. The Fund maintains liquid assets from its portfolio having a value not less than the repurchase price, including accrued interest. Dollar roll transactions involve certain risks, including the risk that the securities returned to the Fund at the end of the roll period, while substantially similar, could be inferior to what was initially sold to the counterparty. The Fund accounts for a dollar roll transaction as a purchase and sale whereby the difference in the sales price and purchase price of the security sold is recorded as a realized gain (loss).
(I) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. As of October 31, 2018, the Fund did not have any portfolio securities on loan.
(J) Government Risk. Investments in the Fund are not guaranteed, even though some of the Fund’s underlying investments are guaranteed by the U.S. government or its agencies or instrumentalities. The principal risk of mortgage-related and asset-backed securities is that the underlying debt may be prepaid ahead of schedule, if interest rates
24 | MainStay MacKay Government Fund |
fall, thereby reducing the value of the Fund’s investment. If interest rates rise, less of the debt may be prepaid and the Fund may lose money because the Fund may be unable to invest in higher yielding assets. The Fund is subject to interest-rate risk and can lose principal value when interest rates rise. Bonds are also subject to credit risk, in which the bond issuer may fail to pay interest and principal in a timely manner.
(K) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.50% up to $500 million; 0.475% from $500 million to $1 billion; and 0.45% in excess of $1 billion. During the year ended October 31, 2018, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.50%.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) for Class A shares do not exceed 1.00% of its average daily net assets.
New York Life Investments will apply an equivalent waiver or reimbursement, in an equal number of basis points, to the other share classes of the Fund, except for Class R6. New York Life Investments has also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. These agreements will remain in effect until February 28, 2019, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $575,965 and waived fees/reimbursed expenses in the amount of $70,447.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class and Class T Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class T shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class T shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. During the year ended October 31, 2018, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $2,846 and $2,567, respectively.
25 |
Notes to Financial Statements (continued)
During the year ended October 31, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Class B and Class C shares of $19, $4,384 and $190, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 85,537 | ||
Investor Class | 114,954 | |||
Class B | 20,199 | |||
Class C | 40,802 | |||
Class I | 6,810 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the year ended October 31, 2018, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Companies | Value, Beginning of Year | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Year | Dividend Income | Other Distributions | Shares End of Year | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | — | $ | 51,434 | $ | (49,633 | ) | $ | — | $ | — | $ | 1,801 | $ | 19 | $ | — | 1,801 | ||||||||||||||||||
|
|
Note 4–Federal Income Tax
As of October 31, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized | Net Unrealized | |||||||||||||
Investments in Securities | $ | 105,535,224 | $ | 1,040,496 | $ | (1,556,022 | ) | $ | (515,526 | ) |
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary Income | Accumulated Other Gain (Loss) | Other Temporary Differences | Unrealized Appreciation | Total Accumulated Gain (Loss) | ||||||||||||||
$6,025 | $ | (2,664,406 | ) | $ | (14,874 | ) | $ | (515,526 | ) | $ | (3,188,781 | ) |
Other temporary differences are primarily due to dividends payable.
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards of $2,664,406 were available as shown in the table below, to the extent provided by the regulations to offset future realized
gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||
Unlimited | $845 | $1,819 |
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 2,500,106 | $ | 2,735,795 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
26 | MainStay MacKay Government Fund |
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to July 31, 2018, the aggregate commitment amount and the commitment fee were the same as those under the current Credit Agreement. During the year ended October 31, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the year ended October 31, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2018, purchases and sales of U.S. government securities were $65,693 and $85,670, respectively. Purchases and sales of securities, other than U.S. government securities and short-term securities, were $0 and $475, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 207,443 | $ | 1,680,510 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 198,448 | 1,609,156 | ||||||
Shares redeemed | (1,828,879 | ) | (14,888,704 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (1,422,988 | ) | (11,599,038 | ) | ||||
Shares converted into Class A (See Note 1) | 138,473 | 1,123,106 | ||||||
Shares converted from Class A (See Note 1) | (58,839 | ) | (475,124 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,343,354 | ) | $ | (10,951,056 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 442,066 | $ | 3,696,298 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 185,394 | 1,545,806 | ||||||
Shares redeemed | (3,049,836 | ) | (25,436,408 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (2,422,376 | ) | (20,194,304 | ) | ||||
Shares converted into Class A (See Note 1) | 1,563,241 | 13,077,517 | ||||||
Shares converted from Class A (See Note 1) | (92,688 | ) | (772,095 | ) | ||||
|
| |||||||
Net increase (decrease) | (951,823 | ) | $ | (7,888,882 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 82,740 | $ | 675,433 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 53,673 | 437,016 | ||||||
Shares redeemed | (377,584 | ) | (3,081,823 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (241,171 | ) | (1,969,374 | ) | ||||
Shares converted into Investor Class (See Note 1) | 96,421 | 783,567 | ||||||
Shares converted from Investor Class (See Note 1) | (111,225 | ) | (906,001 | ) | ||||
|
| |||||||
Net increase (decrease) | (255,975 | ) | $ | (2,091,808 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 130,052 | $ | 1,093,794 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 73,026 | 611,415 | ||||||
Shares redeemed | (607,500 | ) | (5,096,604 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (404,422 | ) | (3,391,395 | ) | ||||
Shares converted into Investor Class (See Note 1) | 169,422 | 1,419,001 | ||||||
Shares converted from Investor Class (See Note 1) | (1,539,319 | ) | (12,939,187 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,774,319 | ) | $ | (14,911,581 | ) | |||
|
|
27 |
Notes to Financial Statements (continued)
Class B | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 13,090 | $ | 106,303 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 5,700 | 46,265 | ||||||
Shares redeemed | (115,760 | ) | (941,872 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (96,970 | ) | (789,304 | ) | ||||
Shares converted from Class B (See Note 1) | (64,751 | ) | (525,548 | ) | ||||
|
| |||||||
Net increase (decrease) | (161,721 | ) | $ | (1,314,852 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 39,552 | $ | 330,200 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,476 | 53,997 | ||||||
Shares redeemed | (212,714 | ) | (1,777,702 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (166,686 | ) | (1,393,505 | ) | ||||
Shares converted from Class B (See Note 1) | (101,530 | ) | (847,690 | ) | ||||
|
| |||||||
Net increase (decrease) | (268,216 | ) | $ | (2,241,195 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 216,696 | $ | 1,741,803 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 10,834 | 87,818 | ||||||
Shares redeemed | (405,938 | ) | (3,300,912 | ) | ||||
|
| |||||||
Net increase (decrease) | (178,408 | ) | $ | (1,471,291 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 130,417 | $ | 1,087,194 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 12,652 | 105,425 | ||||||
Shares redeemed | (1,266,564 | ) | (10,556,654 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,123,495 | ) | $ | (9,364,035 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 143,403 | $ | 1,188,216 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 16,667 | 136,624 | ||||||
Shares redeemed | (359,405 | ) | (2,954,096 | ) | ||||
|
| |||||||
Net increase (decrease) | (199,335 | ) | $ | (1,629,256 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 2,565,649 | $ | 21,605,204 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 24,623 | 207,152 | ||||||
Shares redeemed | (3,402,111 | ) | (28,707,918 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (811,839 | ) | (6,895,562 | ) | ||||
Shares converted into Class I (See Note 1) | 7,422 | 62,454 | ||||||
|
| |||||||
Net increase (decrease) | (804,417 | ) | $ | (6,833,108 | ) | |||
|
|
Note 10–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
At meetings held on December 10-12, 2018, the Board of Trustees of The MainStay Funds considered and approved, among other related proposals: (i) changing the Fund’s name and modifying the Fund’s principal investment strategies, investment process, non-fundamental “names rule” investment policy and principal risks; (ii) adding an expense limitation; and (iii) changing the Fund’s primary benchmark. These changes are expected to become effective on or about February 28, 2019.
28 | MainStay MacKay Government Fund |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The MainStay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MainStay MacKay Government Fund (formerly, MainStay Government Fund) (the Fund), one of the funds constituting The MainStay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians, the transfer agent, and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
29 |
Federal Income Tax Information
(Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders in a written statement as to the federal tax status of dividends paid by the Fund during such fiscal years.
For the fiscal year ended October 31, 2018, the Fund designated approximately $2,546 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
30 | MainStay MacKay Government Fund |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
31 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
32 | MainStay MacKay Government Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
33 |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
* | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
34 | MainStay MacKay Government Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1716016 MS293-18 | MSG11-12/18 (NYLIM) NL211 |
MainStay MacKay High Yield Corporate Bond Fund
(Formerly known as MainStay High Yield Corporate Bond Fund)
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception | One Year | Five Years or Since Inception | Ten Years or Since Inception | Gross Expense Ratio3 | ||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | –3.27 1.29 | %
| | 3.45 4.41 | %
| | 8.63 9.13 | %
| | 0.98 0.98 | %
| |||||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –3.27 1.29 |
| | 3.41 4.37 |
| | 8.59 9.09 |
| | 1.03 1.03 |
| |||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 5/1/1986 | | –4.15 0.64 |
| | 3.28 3.60 |
| | 8.27 8.27 |
| | 1.78 1.78 |
| |||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | –0.32 0.64 |
| | 3.60 3.60 |
| | 8.27 8.27 |
| | 1.78 1.78 |
| |||||||||
Class I Shares | No Sales Charge | 1/2/2004 | 1.57 | 4.71 | 9.40 | 0.73 | ||||||||||||||||||
Class R1 Shares | No Sales Charge | 6/29/2012 | 1.46 | 4.57 | 5.58 | 0.83 | ||||||||||||||||||
Class R2 Shares | No Sales Charge | 5/1/2008 | 1.20 | 4.30 | 9.00 | 1.08 | ||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | 0.96 | 8.51 | 8.51 | 1.33 | ||||||||||||||||||
Class R6 Shares | No Sales Charge | 6/17/2013 | 1.71 | 4.82 | 5.01 | 0.59 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have been |
lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
ICE BofA Merrill Lynch U.S. High Yield Constrained Index4 | 0.86 | % | 4.69 | % | 11.20 | % | ||||||
Credit Suisse High Yield Index5 | 0.93 | 4.57 | 10.62 | |||||||||
Morningstar High Yield Bond Category Average6 | 0.45 | 3.52 | 9.19 |
4. | The ICE BofA Merrill Lynch U.S. High Yield Constrained Index is the Fund’s primary broad-based securities market index for comparison purposes. The ICE BofA Merrill Lynch U.S. High Yield Constrained Index is a market value-weighted index of all domestic and Yankee high-yield bonds, including deferred interest bonds and payment-in-kind securities. Issuers included in the Index have maturities of one year or more and have a credit rating lower than BBB-/Baa3, but are not in default. No single issuer may constitute greater than 2% of the Index. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Credit Suisse High Yield Index is the Fund’s secondary benchmark. The Credit Suisse High Yield Index is a market-weighted index that includes |
publicly traded bonds rated below BBB by S&P and Baa by Moody’s. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar High Yield Bond Category Average is representative of funds that concentrate on lower-quality bonds, which are riskier than those of higher-quality companies. These portfolios primarily invest in U.S. high-income debt securities where at least 65% or more of bond assets are not rated or are rated by a major agency such as Standard & Poor’s or Moody’s at the level of BB and below. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay High Yield Corporate Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay High Yield Corporate Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 10/31/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,008.60 | $ | 5.01 | $ | 1,020.22 | $ | 5.04 | 0.99% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,008.50 | $ | 5.16 | $ | 1,020.06 | $ | 5.19 | 1.02% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,004.40 | $ | 8.94 | $ | 1,016.28 | $ | 9.00 | 1.77% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,004.40 | $ | 8.94 | $ | 1,016.28 | $ | 9.00 | 1.77% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,010.00 | $ | 3.75 | $ | 1,021.48 | $ | 3.77 | 0.74% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,009.40 | $ | 4.31 | $ | 1,020.92 | $ | 4.33 | 0.85% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,008.10 | $ | 5.52 | $ | 1,019.71 | $ | 5.55 | 1.09% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,006.90 | $ | 6.78 | $ | 1,018.45 | $ | 6.82 | 1.34% | |||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 1,010.60 | $ | 2.94 | $ | 1,022.28 | $ | 2.96 | 0.58% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of October 31, 2018 (Unaudited)
See Portfolio of Investments beginning on page 10 for specific holdings within these categories. The Fund’s portfolio is subject to change.
Top Ten Holdings or Issuers Held as of October 31, 2018 (excluding short-term investment) (Unaudited)
1. | T-Mobile USA, Inc., 4.00%–6.50%, due 4/15/22–2/1/28 |
2. | HCA, Inc., 4.25%–8.36%, due 10/15/19–11/6/33 |
3. | Equinix, Inc., 5.375%–5.875%, due 1/1/22–5/15/27 |
4. | Exide Technologies |
5. | CCO Holdings LLC / CCO Holdings Capital Corp., 5.00%–5.875%, due 2/15/23–2/1/28 |
6. | Carlson Travel, Inc., 6.75%–9.50%, due 12/15/23–12/15/24 |
7. | Netflix, Inc., 4.875%–5.875%, due 2/15/22–11/15/28 |
8. | MSCI, Inc., 4.75%–5.75%, due 11/15/24–5/15/27 |
9. | GenOn Energy, Inc., 7.875%–9.50%, due 6/15/17–10/15/18 |
10. | MPLX, L.P., 4.875%–5.50%, due 2/15/23–6/1/25 |
8 | MainStay MacKay High Yield Corporate Bond Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio manager Andrew Susser of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay High Yield Corporate Bond Fund perform relative to its benchmarks and peer group during the 12 months ended October 31, 2018?
For the 12 months ended October 31, 2018, Class I shares of MainStay MacKay High Yield Corporate Bond Fund returned 1.57%, outperforming the 0.86% return of the Fund’s primary benchmark, the ICE BofA Merrill Lynch U.S. High Yield Constrained Index, and the 0.93% return of the Fund’s secondary benchmark, the Credit Suisse High Yield Index. Over the same period, Class I shares also outperformed the 0.45% return of the Morningstar High Yield Bond Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
Treasury yields in the United States increased over the reporting period, with the 5-year U.S. Treasury rate ending the period at 2.97%, an increase of 96 basis points over the prior year. (A basis point is one one-hundredth of a percentage point.) The market environment continued to favor lower-quality credits and shorter-duration bonds. CCC-rated2 shorter-duration credits outperformed the broad market. CCC-rated credits were up 4.6% and short-duration high-yield bonds gained 2.9%, compared to the broader market gain of 0.9%. The Fund’s underweight allocation to the CCC segment of the market detracted from relative performance, however; the security selection within this group helped mitigate some of those returns. Strong relative performance came from the BB-rated3 bonds as the Fund’s underweight allocation and security selection added to returns.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay High Yield Corporate Bond Fund was renamed MainStay MacKay High Yield Corporate Bond Fund. For more information on this change, please refer to the supplement dated December 15, 2017.
What was the Fund’s duration4 strategy during the reporting period?
The Fund is not managed to a duration strategy, and the Fund’s duration positioning is the result of our bottom-up investment
process. As of October 31, 2018, the Fund’s modified duration to worst5 was 3.64 years.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, security selection in the utility, capital goods and basic industry sectors were the strongest positive contributors to relative performance. (Contributions take weightings and total returns into account.) Credit selection in the retail and services sectors also contributed positively to relative performance. Security selection in the energy—exploration & production and health care sectors detracted from relative performance.
What were some of the Fund’s largest purchases and sales during the reporting period?
During the reporting period, the Fund purchased new issue bonds of T-Mobile. In our view, T-Mobile has strategically important assets, growing free cash flow with moderate leverage relative to its peers. The Fund also purchased the new issue bonds of Netflix. Netflix is a large strategic firm with a growing international subscriber base. The Fund reduced its exposure to the bonds of Avis Budget Group on relative value and concerns over increased leverage used for share repurchases.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, there were no material changes to sector weightings. The Fund’s exposure to metals/mining and energy—exploration & production credits decreased. The Fund’s exposure increased in the leisure and telecom—wireless sectors.
How was the Fund positioned at the end of the reporting period?
As of October 31, 2018, the Fund’s largest overweights were in the automotive, consumer goods and basic industry sectors. The Fund’s largest underweights were in the health care, energy, and technology & electronics sectors.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
2. | An obligation rated “CCC’ by Standard & Poor’s (“S&P”) is deemed by S&P to be currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. It is the opinion of S&P that in the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
3. | An obligation rated “BB’ by S&P is deemed by S&P to be less vulnerable to nonpayment than other speculative issues. In the opinion of S&P, however, the obligor faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
4. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
5. | Modified duration is inversely related to the approximate percentage change in price for a given change in yield. Duration to worst is the duration of a bond computed using the bond’s nearest call date or maturity, whichever comes first. This measure ignores future cash flow fluctuations due to embedded optionality. fluctuations due to embedded optionality. fluctuations due to embedded optionality. |
The opinions expressed are those of the portfolio manager as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
9 |
Portfolio of Investments October 31, 2018
Principal Amount | Value | |||||||
Long-Term Bonds 93.3%† Convertible Bonds 0.8% |
| |||||||
Auto Parts & Equipment 0.7% |
| |||||||
Exide Technologies (a)(b)(c)(d)(e) | ||||||||
7.00% (7.00% PIK), due 4/30/25 | $ | 85,685,966 | $ | 43,528,471 | ||||
7.25% (7.25% PIK), due 4/30/25 | 20,701,373 | 21,032,595 | ||||||
|
| |||||||
64,561,066 | ||||||||
|
| |||||||
Media 0.1% |
| |||||||
DISH Network Corp. | 8,410,000 | 7,513,914 | ||||||
|
| |||||||
Mining 0.0%‡ |
| |||||||
Aleris International, Inc. | 11,797 | 11,029 | ||||||
|
| |||||||
Total Convertible Bonds | 72,086,009 | |||||||
|
| |||||||
Corporate Bonds 91.0% |
| |||||||
Advertising 0.8% |
| |||||||
Lamar Media Corp. | ||||||||
5.375%, due 1/15/24 | 5,515,000 | 5,521,894 | ||||||
5.75%, due 2/1/26 | 19,342,000 | 19,438,710 | ||||||
Outfront Media Capital LLC / Outfront Media Capital Corp. | ||||||||
5.25%, due 2/15/22 | 12,600,000 | 12,690,720 | ||||||
5.625%, due 2/15/24 | 28,906,000 | 28,953,695 | ||||||
|
| |||||||
66,605,019 | ||||||||
|
| |||||||
Aerospace & Defense 1.0% |
| |||||||
BBA U.S. Holdings, Inc. | 4,105,000 | 4,058,819 | ||||||
KLX, Inc. | 21,990,000 | 22,649,700 | ||||||
TransDigm UK Holdings PLC | 5,000,000 | 4,987,500 | ||||||
TransDigm, Inc. | ||||||||
6.00%, due 7/15/22 | 6,935,000 | 6,969,675 | ||||||
6.50%, due 7/15/24 | 28,691,000 | 29,002,010 | ||||||
6.50%, due 5/15/25 | 5,000,000 | 4,981,250 | ||||||
Triumph Group, Inc. | 18,015,000 | 16,934,100 | ||||||
|
| |||||||
89,583,054 | ||||||||
|
| |||||||
Apparel 0.2% |
| |||||||
William Carter Co. | 17,560,000 | 17,625,850 | ||||||
|
| |||||||
Auto Manufacturers 1.5% |
| |||||||
Allison Transmission, Inc. | 3,000,000 | 2,911,860 | ||||||
BCD Acquisition, Inc. | 20,955,000 | 22,107,525 |
Principal Amount | Value | |||||||
Auto Manufacturers (continued) | ||||||||
Ford Holdings LLC | ||||||||
9.30%, due 3/1/30 | $ | 18,195,000 | $ | 21,913,192 | ||||
9.375%, due 3/1/20 | 1,695,000 | 1,809,191 | ||||||
Ford Motor Co. | 980,000 | 1,294,935 | ||||||
J.B. Poindexter & Company, Inc. | 18,880,000 | 19,446,400 | ||||||
McLaren Finance PLC | 25,035,000 | 23,658,075 | ||||||
Navistar International Corp. | 20,500,000 | 20,910,000 | ||||||
Wabash National Corp. | 20,509,000 | 18,458,100 | ||||||
|
| |||||||
132,509,278 | ||||||||
|
| |||||||
Auto Parts & Equipment 3.4% |
| |||||||
Adient Global Holdings, Ltd. | 20,005,000 | 17,154,288 | ||||||
American Axle & Manufacturing, Inc. |
| |||||||
6.25%, due 4/1/25 | 15,621,000 | 14,742,319 | ||||||
6.25%, due 3/15/26 | 10,950,000 | 10,347,750 | ||||||
6.50%, due 4/1/27 | 12,000,000 | 11,415,000 | ||||||
Dana Financing Luxembourg S.A.R.L. | 13,190,000 | 12,662,400 | ||||||
Exide Technologies | 106,970,604 | 96,059,602 | ||||||
IHO Verwaltungs GmbH (a)(e) | ||||||||
4.125% (4.125% Cash or 4.875% PIK), due 9/15/21 | 28,735,000 | 27,872,950 | ||||||
4.50% (4.50% Cash or 5.25% PIK), due 9/15/23 | 25,555,000 | 23,798,094 | ||||||
4.75% (4.75% Cash or 5.50% PIK), due 9/15/26 | 22,435,000 | 20,191,500 | ||||||
Nexteer Automotive Group, Ltd. | 24,020,000 | 24,440,997 | ||||||
Schaeffler Finance B.V. | 24,030,000 | 23,729,625 | ||||||
Tenneco, Inc. | 9,446,000 | 7,840,180 | ||||||
Titan International, Inc. | 5,370,000 | 5,007,525 | ||||||
|
| |||||||
295,262,230 | ||||||||
|
| |||||||
Banks 0.3% |
| |||||||
Freedom Mortgage Corp. | 10,000,000 | 9,250,000 | ||||||
Provident Funding Associates, L.P. / PFG Finance Corp. | 14,750,000 | 14,528,750 | ||||||
|
| |||||||
23,778,750 | ||||||||
|
|
10 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Building Materials 1.3% |
| |||||||
BMC East LLC | $ | 3,000,000 | $ | 2,812,500 | ||||
Gibraltar Industries, Inc. | 11,600,000 | 11,629,000 | ||||||
James Hardie International Finance DAC (e) |
| |||||||
4.75%, due 1/15/25 | 10,700,000 | 9,937,625 | ||||||
5.00%, due 1/15/28 | 17,000,000 | 15,427,500 | ||||||
Masonite International Corp. | 10,000,000 | 9,500,000 | ||||||
Summit Materials LLC / Summit Materials Finance Corp. | ||||||||
5.125%, due 6/1/25 (e) | 7,000,000 | 6,265,000 | ||||||
6.125%, due 7/15/23 | 35,515,000 | 34,360,762 | ||||||
8.50%, due 4/15/22 | 17,520,000 | 18,483,600 | ||||||
|
| |||||||
108,415,987 | ||||||||
|
| |||||||
Chemicals 1.7% |
| |||||||
Blue Cube Spinco LLC | ||||||||
9.75%, due 10/15/23 | 33,610,000 | 37,391,125 | ||||||
10.00%, due 10/15/25 | 26,425,000 | 29,926,312 | ||||||
Kissner Holdings, L.P. / Kissner Milling Co., Ltd. / BSC Holding, Inc. / Kissner USA | 21,525,000 | 21,847,875 | ||||||
NOVA Chemicals Corp. | 15,000,000 | 13,781,250 | ||||||
Olin Corp. | 19,094,000 | 19,189,470 | ||||||
PolyOne Corp. | 29,754,000 | 29,754,000 | ||||||
|
| |||||||
151,890,032 | ||||||||
|
| |||||||
Commercial Services 4.6% |
| |||||||
Ashtead Capital, Inc. (e) | ||||||||
4.375%, due 8/15/27 | 6,010,000 | 5,527,397 | ||||||
5.25%, due 8/1/26 | 6,000,000 | 5,904,600 | ||||||
5.625%, due 10/1/24 | 18,785,000 | 19,254,625 | ||||||
Avis Budget Car Rental LLC / Avis Budget Finance, Inc. (g) | ||||||||
5.50%, due 4/1/23 | 11,000,000 | 10,697,500 | ||||||
6.375%, due 4/1/24 (e) | 8,205,000 | 7,835,775 | ||||||
Cimpress N.V. | 14,200,000 | 14,182,250 | ||||||
Flexi-Van Leasing, Inc. | 28,010,000 | 23,248,300 | ||||||
Gartner, Inc. | 33,981,000 | 33,726,142 | ||||||
Graham Holdings Co. | 28,200,000 | 28,411,500 |
Principal Amount | Value | |||||||
Commercial Services (continued) | ||||||||
IHS Markit, Ltd. (e) | ||||||||
4.75%, due 2/15/25 | $ | 10,000,000 | $ | 9,899,800 | ||||
5.00%, due 11/1/22 | 60,020,000 | 61,268,416 | ||||||
Jaguar Holding Co. II / Pharmaceutical Product Development LLC | 14,976,000 | 14,971,507 | ||||||
Laureate Education, Inc. | 5,015,000 | 5,353,513 | ||||||
Matthews International Corp. | 10,000,000 | 9,375,000 | ||||||
Nielsen Co. Luxembourg S.A.R.L. (e) | ||||||||
5.00%, due 2/1/25 | 28,027,000 | 27,247,569 | ||||||
5.50%, due 10/1/21 | 6,850,000 | 6,884,250 | ||||||
Nielsen Finance LLC / Nielsen Finance Co. | ||||||||
4.50%, due 10/1/20 | 13,715,000 | 13,680,713 | ||||||
5.00%, due 4/15/22 (e) | 60,935,000 | 59,335,456 | ||||||
Ritchie Bros. Auctioneers, Inc. | 14,270,000 | 14,055,950 | ||||||
United Rentals North America, Inc. | ||||||||
4.625%, due 7/15/23 | 10,600,000 | 10,507,250 | ||||||
4.875%, due 1/15/28 | 12,000,000 | 10,811,400 | ||||||
6.50%, due 12/15/26 | 10,470,000 | 10,585,065 | ||||||
|
| |||||||
402,763,978 | ||||||||
|
| |||||||
Computers 0.3% |
| |||||||
NCR Corp. | 25,370,000 | 25,306,575 | ||||||
|
| |||||||
Cosmetics & Personal Care 0.6% |
| |||||||
Edgewell Personal Care Co. | ||||||||
4.70%, due 5/19/21 | 28,000,000 | 27,860,000 | ||||||
4.70%, due 5/24/22 | 20,713,000 | 20,143,392 | ||||||
|
| |||||||
48,003,392 | ||||||||
|
| |||||||
Distribution & Wholesale 0.1% |
| |||||||
American Tire Distributors, Inc. | 15,755,000 | 2,678,350 | ||||||
HD Supply, Inc. | 2,705,000 | 2,586,656 | ||||||
|
| |||||||
5,265,006 | ||||||||
|
| |||||||
Diversified Financial Services 3.5% |
| |||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | ||||||||
4.625%, due 10/30/20 | 9,250,000 | 9,391,043 | ||||||
5.00%, due 10/1/21 | 15,360,000 | 15,758,093 | ||||||
Credit Acceptance Corp. | ||||||||
6.125%, due 2/15/21 | 8,362,000 | 8,381,233 | ||||||
7.375%, due 3/15/23 | 25,095,000 | 25,910,587 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Diversified Financial Services (continued) |
| |||||||
Jefferies Finance LLC / JFIN Co-Issuer Corp. | $ | 12,250,000 | $ | 11,974,375 | ||||
Ladder Capital Finance Holdings LLLP / Ladder Capital Finance Corp. (e) | ||||||||
5.25%, due 3/15/22 | 18,175,000 | 18,084,125 | ||||||
5.25%, due 10/1/25 | 2,800,000 | 2,590,000 | ||||||
5.875%, due 8/1/21 | 25,700,000 | 25,892,750 | ||||||
Lincoln Finance, Ltd. | 18,090,000 | 18,361,350 | ||||||
LPL Holdings, Inc. | 23,920,000 | 23,232,300 | ||||||
Nationstar Mortgage Holdings, Inc. (e) | ||||||||
8.125%, due 7/15/23 | 9,500,000 | 9,666,250 | ||||||
9.125%, due 7/15/26 | 20,000,000 | 20,300,000 | ||||||
Ocwen Loan Servicing LLC | 13,000,000 | 12,935,000 | ||||||
Oxford Finance LLC / Oxford Finance Co-Issuer II, Inc. | 19,500,000 | 19,768,125 | ||||||
Quicken Loans, Inc. (e) | ||||||||
5.25%, due 1/15/28 | 4,000,000 | 3,560,000 | ||||||
5.75%, due 5/1/25 | 7,000,000 | 6,746,250 | ||||||
Springleaf Finance Corp. | 37,580,000 | 35,607,050 | ||||||
VFH Parent LLC / Orchestra Co-Issuer, Inc. | 26,865,000 | 27,402,300 | ||||||
Werner FinCo, L.P. / Werner FinCo, Inc. | 11,430,000 | 10,658,475 | ||||||
|
| |||||||
306,219,306 | ||||||||
|
| |||||||
Electric 2.2% |
| |||||||
Calpine Corp. (e) | ||||||||
5.875%, due 1/15/24 | 20,321,000 | 20,321,000 | ||||||
6.00%, due 1/15/22 | 24,773,000 | 24,896,865 | ||||||
GenOn Energy, Inc. (h)(i) | ||||||||
7.875%, due 6/15/17 | 81,632,000 | 56,122,000 | ||||||
9.50%, due 10/15/18 | 59,085,000 | 40,325,513 | ||||||
NRG Energy, Inc. | ||||||||
6.25%, due 5/1/24 | 5,340,000 | 5,451,499 | ||||||
6.625%, due 1/15/27 | 14,015,000 | 14,505,525 | ||||||
NRG REMA LLC | 35,967,221 | 30,662,056 | ||||||
|
| |||||||
192,284,458 | ||||||||
|
| |||||||
Electrical Components & Equipment 0.2% |
| |||||||
Energizer Gamma Acquisition, Inc. | 1,440,000 | 1,440,000 |
Principal Amount | Value | |||||||
Electrical Components & Equipment (continued) |
| |||||||
WESCO Distribution, Inc. | $ | 14,549,000 | $ | 14,530,814 | ||||
|
| |||||||
15,970,814 | ||||||||
|
| |||||||
Electrical Equipment 0.2% |
| |||||||
Resideo Funding, Inc. | 13,040,000 | 13,108,199 | ||||||
|
| |||||||
Electronics 0.2% |
| |||||||
Itron, Inc. | 16,330,000 | 15,207,313 | ||||||
|
| |||||||
Engineering & Construction 0.5% |
| |||||||
Tutor Perini Corp. | 11,010,000 | 11,023,762 | ||||||
Weekley Homes LLC / Weekley Finance Corp. |
| |||||||
6.00%, due 2/1/23 | 26,379,000 | 25,323,840 | ||||||
6.625%, due 8/15/25 | 11,015,000 | 10,409,175 | ||||||
|
| |||||||
46,756,777 | ||||||||
|
| |||||||
Entertainment 1.3% |
| |||||||
Boyne USA, Inc. | 12,500,000 | 13,031,250 | ||||||
Churchill Downs, Inc. | 7,000,000 | 6,370,000 | ||||||
Eldorado Resorts Inc. | 6,490,000 | 6,356,306 | ||||||
International Game Technology PLC | 23,000,000 | 22,568,750 | ||||||
Jacobs Entertainment, Inc. | 10,359,000 | 10,915,796 | ||||||
Merlin Entertainments PLC | 28,100,000 | 28,100,000 | ||||||
Rivers Pittsburgh Borrower, L.P. / Rivers Pittsburgh Finance Corp. | 23,000,000 | 22,885,000 | ||||||
|
| |||||||
110,227,102 | ||||||||
|
| |||||||
Food 2.3% |
| |||||||
B&G Foods, Inc. | ||||||||
4.625%, due 6/1/21 | 5,000,000 | 4,968,750 | ||||||
5.25%, due 4/1/25 | 27,985,000 | 26,655,713 | ||||||
C&S Group Enterprises LLC | 53,700,000 | 51,820,500 | ||||||
Ingles Markets, Inc. | 14,617,000 | 14,543,915 | ||||||
KeHE Distributors LLC / KeHE Finance Corp. | 23,325,000 | 22,392,000 | ||||||
Land O’Lakes Capital Trust I | 16,324,000 | 17,629,920 |
12 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Food (continued) |
| |||||||
Land O’Lakes, Inc. | $ | 23,000,000 | $ | 23,719,241 | ||||
Simmons Foods, Inc. | 7,000,000 | 7,070,000 | ||||||
TreeHouse Foods, Inc. | 28,315,000 | 28,244,212 | ||||||
|
| |||||||
197,044,251 | ||||||||
|
| |||||||
Forest Products & Paper 1.1% |
| |||||||
Mercer International, Inc. | ||||||||
5.50%, due 1/15/26 | 3,500,000 | 3,393,950 | ||||||
6.50%, due 2/1/24 | 11,998,000 | 12,117,980 | ||||||
Schweitzer-Mauduit International, Inc. | 16,380,000 | 16,584,750 | ||||||
Smurfit Kappa Treasury Funding DAC | 52,580,000 | 60,861,350 | ||||||
|
| |||||||
92,958,030 | ||||||||
|
| |||||||
Gas 0.9% |
| |||||||
AmeriGas Partners, L.P. / AmeriGas Finance Corp. | ||||||||
5.50%, due 5/20/25 | 6,575,000 | 6,147,625 | ||||||
5.625%, due 5/20/24 | 26,531,000 | 25,469,760 | ||||||
5.75%, due 5/20/27 | 20,060,000 | 18,605,650 | ||||||
5.875%, due 8/20/26 | 24,425,000 | 23,081,625 | ||||||
Rockpoint Gas Storage Canada, Ltd. | 7,000,000 | 6,965,000 | ||||||
|
| |||||||
80,269,660 | ||||||||
|
| |||||||
Health Care—Products 0.5% |
| |||||||
Avanos Medical, Inc. | 9,331,000 | 9,412,646 | ||||||
DJO Finco, Inc. / DJO Finance LLC / DJO Finance Corp. | 18,615,000 | 18,739,721 | ||||||
Hill-Rom Holdings, Inc. | 9,040,000 | 9,141,700 | ||||||
Hologic, Inc. | 9,150,000 | 8,578,125 | ||||||
|
| |||||||
45,872,192 | ||||||||
|
| |||||||
Health Care—Services 5.6% |
| |||||||
Acadia Healthcare Co., Inc. | ||||||||
5.625%, due 2/15/23 | 25,940,000 | 25,972,425 | ||||||
6.50%, due 3/1/24 | 10,280,000 | 10,449,620 | ||||||
AHP Health Partners, Inc. | 10,000,000 | 10,175,000 | ||||||
Catalent Pharma Solutions, Inc. | 12,250,000 | 11,484,375 | ||||||
Centene Corp. | ||||||||
4.75%, due 1/15/25 | 6,965,000 | 6,879,400 | ||||||
5.375%, due 6/1/26 (e) | 9,835,000 | 9,982,525 |
Principal Amount | Value | |||||||
Health Care—Services (continued) |
| |||||||
Centene Corp. (continued) |
| |||||||
5.625%, due 2/15/21 | $ | 14,930,000 | $ | 15,153,950 | ||||
6.125%, due 2/15/24 | 23,817,000 | 24,888,765 | ||||||
Charles River Laboratories International, Inc. | 8,920,000 | 8,897,700 | ||||||
Fresenius Medical Care U.S. Finance II, Inc. | 2,600,000 | 2,732,860 | ||||||
HCA, Inc. | ||||||||
4.25%, due 10/15/19 | 5,000,000 | 5,018,750 | ||||||
5.25%, due 4/15/25 | 19,000,000 | 19,403,750 | ||||||
5.25%, due 6/15/26 | 11,805,000 | 12,011,588 | ||||||
5.375%, due 2/1/25 | 24,525,000 | 24,678,281 | ||||||
5.375%, due 9/1/26 | 4,170,000 | 4,138,725 | ||||||
5.875%, due 3/15/22 | 12,030,000 | 12,586,388 | ||||||
5.875%, due 5/1/23 | 7,240,000 | 7,520,550 | ||||||
5.875%, due 2/15/26 | 24,000,000 | 24,540,000 | ||||||
7.50%, due 2/15/22 | 9,417,000 | 10,217,445 | ||||||
7.50%, due 12/15/23 | 1,500,000 | 1,646,250 | ||||||
7.50%, due 11/6/33 | 3,500,000 | 3,745,000 | ||||||
7.58%, due 9/15/25 | 8,020,000 | 8,801,950 | ||||||
7.69%, due 6/15/25 | 30,925,000 | 33,785,562 | ||||||
8.36%, due 4/15/24 | 4,524,000 | 5,112,120 | ||||||
HealthSouth Corp. | 19,575,000 | 19,526,062 | ||||||
Molina Healthcare, Inc. | 14,025,000 | 14,025,000 | ||||||
MPH Acquisition Holdings LLC | 60,250,000 | 61,203,155 | ||||||
Polaris Intermediate Corp. | 20,000,000 | 20,500,000 | ||||||
Syneos Health, Inc. / inVentiv Health, Inc. / inVentiv Health Clinical, Inc. | 3,667,000 | 3,859,518 | ||||||
Tenet Healthcare Corp. | ||||||||
4.625%, due 7/15/24 | 4,000,000 | 3,855,400 | ||||||
6.00%, due 10/1/20 | 8,000,000 | 8,192,400 | ||||||
6.75%, due 6/15/23 | 8,315,000 | 8,263,031 | ||||||
8.125%, due 4/1/22 | 25,500,000 | 26,551,875 | ||||||
WellCare Health Plans, Inc. | ||||||||
5.25%, due 4/1/25 | 13,310,000 | 13,276,725 | ||||||
5.375%, due 8/15/26 (e) | 7,255,000 | 7,236,863 | ||||||
|
| |||||||
486,313,008 | ||||||||
|
| |||||||
Home Builders 2.4% |
| |||||||
Ashton Woods USA LLC / Ashton Woods Finance Co. (e) | ||||||||
6.75%, due 8/1/25 | 5,496,000 | 5,097,540 | ||||||
6.875%, due 2/15/21 | 21,140,000 | 21,140,000 | ||||||
Brookfield Residential Properties, Inc. (e) | ||||||||
6.375%, due 5/15/25 | 6,665,000 | 6,273,431 | ||||||
6.50%, due 12/15/20 | 24,800,000 | 24,800,000 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Home Builders (continued) |
| |||||||
Brookfield Residential Properties, Inc. / Brookfield Residential U.S. Corp. | $ | 37,996,000 | $ | 37,046,100 | ||||
Century Communities, Inc. | ||||||||
5.875%, due 7/15/25 | 4,630,000 | 4,190,150 | ||||||
6.875%, due 5/15/22 | 35,546,000 | 35,368,270 | ||||||
M/I Homes, Inc. | 8,000,000 | 7,360,000 | ||||||
Mattamy Group Corp. | 12,915,000 | 12,140,100 | ||||||
New Home Co., Inc. | 20,030,000 | 19,829,700 | ||||||
Shea Homes, L.P. / Shea Homes Funding Corp. (e) | ||||||||
5.875%, due 4/1/23 | 6,043,000 | 5,710,635 | ||||||
6.125%, due 4/1/25 | 14,900,000 | 13,782,500 | ||||||
Taylor Morrison Communities, Inc. / Taylor Morrison Holdings II, Inc. | 6,430,000 | 6,405,888 | ||||||
Williams Scotsman International, Inc. | 9,500,000 | 9,428,750 | ||||||
|
| |||||||
208,573,064 | ||||||||
|
| |||||||
Household Products & Wares 0.9% |
| |||||||
Prestige Brands, Inc. | 38,808,000 | 38,322,900 | ||||||
Spectrum Brands, Inc. | ||||||||
5.75%, due 7/15/25 | 12,492,000 | 12,148,470 | ||||||
6.125%, due 12/15/24 | 4,000,000 | 3,980,000 | ||||||
6.625%, due 11/15/22 | 24,090,000 | 24,601,912 | ||||||
|
| |||||||
79,053,282 | ||||||||
|
| |||||||
Insurance 1.2% |
| |||||||
American Equity Investment Life Holding Co. | 27,640,000 | 26,688,826 | ||||||
Fairfax Financial Holdings, Ltd. | 5,435,000 | 6,500,657 | ||||||
Fidelity & Guaranty Life Holdings, Inc. | 19,175,000 | 19,007,219 | ||||||
HUB International, Ltd. | 13,000,000 | 12,688,000 | ||||||
MGIC Investment Corp. | 30,580,000 | 31,344,500 | ||||||
USIS Merger Sub, Inc. | 10,000,000 | 9,800,000 | ||||||
|
| |||||||
106,029,202 | ||||||||
|
| |||||||
Internet 2.0% |
| |||||||
Cogent Communications Group, Inc. | 12,046,000 | 12,121,288 |
Principal Amount | Value | |||||||
Internet (continued) | ||||||||
Netflix, Inc. | ||||||||
4.875%, due 4/15/28 (e) | $ | 5,000,000 | $ | 4,587,500 | ||||
5.50%, due 2/15/22 | 25,265,000 | 25,767,521 | ||||||
5.75%, due 3/1/24 | 34,961,000 | 35,572,817 | ||||||
5.875%, due 2/15/25 | 11,411,000 | 11,597,570 | ||||||
5.875%, due 11/15/28 (e) | 28,000,000 | 27,510,000 | ||||||
Symantec Corp. | 13,665,000 | 12,853,882 | ||||||
VeriSign, Inc. | ||||||||
4.625%, due 5/1/23 | 6,615,000 | 6,615,000 | ||||||
4.75%, due 7/15/27 | 14,480,000 | 13,633,644 | ||||||
5.25%, due 4/1/25 | 26,661,000 | 26,594,347 | ||||||
|
| |||||||
176,853,569 | ||||||||
|
| |||||||
Investment Company 0.5% |
| |||||||
FS Energy & Power Fund | 46,500,000 | 47,151,000 | ||||||
|
| |||||||
Iron & Steel 1.1% |
| |||||||
Allegheny Ludlum LLC | 22,688,000 | 22,914,880 | ||||||
Allegheny Technologies, Inc. | 12,500,000 | 13,187,500 | ||||||
Big River Steel LLC / BRS Finance Corp. | 53,225,000 | 55,487,062 | ||||||
Commercial Metals Co. | 6,000,000 | 5,760,000 | ||||||
|
| |||||||
97,349,442 | ||||||||
|
| |||||||
Leisure Time 1.9% |
| |||||||
Brunswick Corp. | 21,573,000 | 21,577,478 | ||||||
Carlson Travel, Inc. (e) | ||||||||
6.75%, due 12/15/23 | 72,516,000 | 71,972,130 | ||||||
9.50%, due 12/15/24 | 47,475,000 | 45,397,969 | ||||||
Vista Outdoor, Inc. | 29,402,000 | 28,225,920 | ||||||
|
| |||||||
167,173,497 | ||||||||
|
| |||||||
Lodging 1.7% |
| |||||||
Boyd Gaming Corp. | 29,160,000 | 28,175,850 | ||||||
Choice Hotels International, Inc. | 25,470,000 | 26,743,500 | ||||||
Hilton Domestic Operating Co., Inc. | 29,065,000 | 28,411,037 | ||||||
Jack Ohio Finance LLC / Jack Ohio Finance 1 Corp. | 18,480,000 | 18,965,100 | ||||||
Marriott Ownership Resorts, Inc. / ILG LLC | 29,500,000 | 29,795,000 |
14 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Lodging (continued) |
| |||||||
MGM Resorts International | $ | 18,000,000 | $ | 17,505,000 | ||||
|
| |||||||
149,595,487 | ||||||||
|
| |||||||
Machinery—Construction & Mining 0.2% |
| |||||||
BlueLine Rental Finance Corp. / BlueLine Rental LLC | 19,150,000 | 19,987,813 | ||||||
|
| |||||||
Machinery—Diversified 0.4% |
| |||||||
Briggs & Stratton Corp. | 9,000,000 | 9,472,500 | ||||||
Stevens Holding Co., Inc. | 12,880,000 | 12,833,246 | ||||||
Tennant Co. | 15,965,000 | 15,885,175 | ||||||
|
| |||||||
38,190,921 | ||||||||
|
| |||||||
Media 6.8% |
| |||||||
Altice Financing S.A. | 15,335,000 | 14,414,900 | ||||||
Altice France S.A. (e) | ||||||||
6.25%, due 5/15/24 | 16,100,000 | 15,435,875 | ||||||
7.375%, due 5/1/26 | 7,000,000 | 6,700,330 | ||||||
Altice Luxembourg S.A. | 3,000,000 | 2,793,750 | ||||||
Altice U.S. Finance I Corp. | ||||||||
5.375%, due 7/15/23 | 20,225,000 | 20,221,157 | ||||||
5.50%, due 5/15/26 (e) | 6,999,000 | 6,817,446 | ||||||
Block Communications, Inc. | 38,347,000 | 38,874,271 | ||||||
CCO Holdings LLC / CCO Holdings Capital Corp. | ||||||||
5.00%, due 2/1/28 (e) | 36,740,000 | 34,237,087 | ||||||
5.125%, due 2/15/23 | 24,030,000 | 23,909,850 | ||||||
5.125%, due 5/1/23 (e) | 7,000,000 | 6,965,000 | ||||||
5.125%, due 5/1/27 (e) | 37,725,000 | 35,508,656 | ||||||
5.375%, due 5/1/25 (e) | 5,025,000 | 4,918,219 | ||||||
5.75%, due 2/15/26 (e) | 29,345,000 | 29,051,550 | ||||||
5.875%, due 4/1/24 (e) | 23,715,000 | 23,922,506 | ||||||
5.875%, due 5/1/27 (e) | 5,000,000 | 4,912,500 | ||||||
DISH DBS Corp. | ||||||||
5.00%, due 3/15/23 | 2,000,000 | 1,750,000 | ||||||
5.875%, due 7/15/22 | 24,537,000 | 23,187,465 | ||||||
5.875%, due 11/15/24 | 27,900,000 | 23,715,000 | ||||||
6.75%, due 6/1/21 | 21,000,000 | 21,210,000 | ||||||
7.75%, due 7/1/26 | 15,875,000 | 14,208,125 | ||||||
Meredith Corp. | 37,000,000 | 37,000,000 |
Principal Amount | Value | |||||||
Media (continued) |
| |||||||
Midcontinent Communications / Midcontinent Finance Corp. | $ | 18,030,000 | $ | 18,796,275 | ||||
Quebecor Media, Inc. | 34,005,000 | 34,090,013 | ||||||
Sterling Entertainment Enterprises LLC | 20,000,000 | 21,150,000 | ||||||
Videotron, Ltd. | ||||||||
5.00%, due 7/15/22 | 20,449,000 | 20,423,439 | ||||||
5.125%, due 4/15/27 (e) | 12,526,000 | 11,868,385 | ||||||
5.375%, due 6/15/24 (e) | 21,850,000 | 21,822,688 | ||||||
Virgin Media Secured Finance PLC | 75,875,000 | 76,728,594 | ||||||
|
| |||||||
594,633,081 | ||||||||
|
| |||||||
Metal Fabricate & Hardware 1.7% |
| |||||||
Grinding Media, Inc. / Moly-Cop AltaSteel, Ltd. | 45,870,000 | 47,131,425 | ||||||
Novelis Corp. (e) | ||||||||
5.875%, due 9/30/26 | 45,565,000 | 42,945,012 | ||||||
6.25%, due 8/15/24 | 23,000,000 | 22,770,000 | ||||||
Optimas OE Solutions Holding LLC / Optimas OE Solutions, Inc. | 18,775,000 | 18,211,750 | ||||||
Park-Ohio Industries, Inc. | 16,190,000 | 16,068,575 | ||||||
|
| |||||||
147,126,762 | ||||||||
|
| |||||||
Mining 1.9% |
| |||||||
Alcoa Nederland Holding B.V. (e) | ||||||||
6.75%, due 9/30/24 | 7,910,000 | 8,305,500 | ||||||
7.00%, due 9/30/26 | 17,600,000 | 18,568,000 | ||||||
Constellium N.V. | 3,000,000 | 2,797,500 | ||||||
First Quantum Minerals, Ltd. | 17,118,000 | 15,812,753 | ||||||
Freeport McMoRan, Inc. | 67,261,000 | 70,439,082 | ||||||
Hecla Mining Co. | 30,123,000 | 30,123,000 | ||||||
Joseph T. Ryerson & Son, Inc. | 9,500,000 | 10,165,000 | ||||||
Lundin Mining Corp. | 10,015,000 | 10,431,624 | ||||||
|
| |||||||
166,642,459 | ||||||||
|
| |||||||
Miscellaneous—Manufacturing 1.0% |
| |||||||
Amsted Industries, Inc. | 22,020,000 | 21,607,125 | ||||||
CTP Transportation Products LLC / CTP Finance, Inc. | 26,950,000 | 26,747,875 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Miscellaneous—Manufacturing (continued) |
| |||||||
EnPro Industries, Inc. | $ | 7,320,000 | $ | 7,230,696 | ||||
Gates Global LLC / Gates Global Co. | 17,876,000 | 17,786,620 | ||||||
Koppers, Inc. | 17,475,000 | 16,737,555 | ||||||
|
| |||||||
90,109,871 | ||||||||
|
| |||||||
Oil & Gas 6.9% |
| |||||||
Ascent Resources Utica Holdings LLC / ARU Finance Corp. (e) | ||||||||
7.00%, due 11/1/26 | 13,790,000 | 13,376,300 | ||||||
10.00%, due 4/1/22 | 13,335,000 | 14,685,169 | ||||||
California Resources Corp. | ||||||||
5.00%, due 1/15/20 | 16,470,000 | 15,481,800 | ||||||
8.00%, due 12/15/22 (e) | 30,160,000 | 26,842,400 | ||||||
Callon Petroleum Co. | 21,500,000 | 20,962,500 | ||||||
Calumet Specialty Products Partners, L.P. / Calumet Finance Corp. | 4,161,000 | 3,994,560 | ||||||
Carrizo Oil & Gas, Inc. | 3,140,000 | 3,145,338 | ||||||
CNX Resources Corp. | 4,998,000 | 4,907,436 | ||||||
Comstock Escrow Corp. | 48,000,000 | 46,320,000 | ||||||
Continental Resources, Inc. | 10,431,000 | 10,533,535 | ||||||
Energy Ventures Gom LLC / EnVen Finance Corp. | 13,000,000 | 14,397,500 | ||||||
Gulfport Energy Corp. | ||||||||
6.00%, due 10/15/24 | 43,999,000 | 41,139,065 | ||||||
6.375%, due 5/15/25 | 21,725,000 | 20,638,750 | ||||||
6.375%, due 1/15/26 | 5,000,000 | 4,662,500 | ||||||
6.625%, due 5/1/23 | 3,787,000 | 3,787,000 | ||||||
Indigo Natural Resources LLC | 9,795,000 | 9,256,275 | ||||||
Matador Resources Co. | 22,655,000 | 22,145,263 | ||||||
Moss Creek Resources Holdings, Inc. | 14,465,000 | 13,918,223 | ||||||
Murphy Oil Corp. | 10,590,000 | 10,999,066 | ||||||
Murphy Oil USA, Inc. | ||||||||
5.625%, due 5/1/27 | 4,000,000 | 3,900,000 | ||||||
6.00%, due 8/15/23 | 23,635,000 | 24,107,700 | ||||||
Newfield Exploration Co. | ||||||||
5.625%, due 7/1/24 | 19,385,000 | 19,966,550 | ||||||
5.75%, due 1/30/22 | 14,140,000 | 14,581,875 |
Principal Amount | Value | |||||||
Oil & Gas (continued) | ||||||||
Oasis Petroleum, Inc. | $ | 4,731,000 | $ | 4,760,569 | ||||
Parsley Energy LLC / Parsley Finance Corp. (e) | ||||||||
5.25%, due 8/15/25 | 12,325,000 | 11,909,031 | ||||||
5.625%, due 10/15/27 | 4,000,000 | 3,943,080 | ||||||
6.25%, due 6/1/24 | 6,100,000 | 6,267,750 | ||||||
PDC Energy, Inc. | 18,395,000 | 17,567,225 | ||||||
PetroQuest Energy, Inc. | ||||||||
10.00%, due 2/15/21 (c)(h) | 70,730,926 | 30,414,298 | ||||||
QEP Resources, Inc. | 11,000,000 | 10,353,750 | ||||||
Range Resources Corp. | ||||||||
5.75%, due 6/1/21 | 23,225,000 | 23,573,375 | ||||||
5.875%, due 7/1/22 | 23,861,000 | 24,010,131 | ||||||
Rex Energy Corp. Escrow Claim Shares | 124,195,000 | 620,975 | ||||||
Southwestern Energy Co. | 20,400,000 | 20,757,000 | ||||||
SRC Energy, Inc. | 26,050,000 | 24,259,062 | ||||||
Talos Production LLC / Talos Production Finance, Inc. | 24,562,822 | 26,159,405 | ||||||
Transocean Guardian, Ltd. | 4,000,000 | 3,960,000 | ||||||
Ultra Resources, Inc. | 28,880,000 | 16,606,000 | ||||||
Whiting Petroleum Corp. | 7,150,000 | 7,141,063 | ||||||
WPX Energy, Inc. | 8,154,000 | 8,337,465 | ||||||
|
| |||||||
604,388,984 | ||||||||
|
| |||||||
Oil & Gas Services 0.7% |
| |||||||
Bristow Group, Inc. | 5,300,000 | 4,995,250 | ||||||
Forum Energy Technologies, Inc. | 44,275,000 | 43,389,500 | ||||||
Nine Energy Service, Inc. | 13,290,000 | 13,505,962 | ||||||
|
| |||||||
61,890,712 | ||||||||
|
| |||||||
Packaging & Containers 0.0%‡ |
| |||||||
Sealed Air Corp. | 2,465,000 | 2,434,188 | ||||||
|
| |||||||
Pharmaceuticals 1.0% |
| |||||||
Bausch Health Cos., Inc. (e) | ||||||||
5.50%, due 11/1/25 | 6,000,000 | 5,880,000 | ||||||
7.50%, due 7/15/21 | 6,991,000 | 7,095,865 |
16 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Pharmaceuticals (continued) | ||||||||
Bausch Health Cos., Inc. (continued) | ||||||||
8.50%, due 1/31/27 | $ | 5,105,000 | $ | 5,194,337 | ||||
9.25%, due 4/1/26 | 38,500,000 | 40,376,875 | ||||||
Endo Dac / Endo Finance LLC / Endo Finco, Inc. | 10,660,000 | 9,167,600 | ||||||
Endo Finance LLC / Endo Finco, Inc. (e) | ||||||||
5.375%, due 1/15/23 | 12,000,000 | 10,230,000 | ||||||
7.25%, due 1/15/22 | 8,500,000 | 8,053,750 | ||||||
|
| |||||||
85,998,427 | ||||||||
|
| |||||||
Pipelines 4.3% |
| |||||||
ANR Pipeline Co. | ||||||||
7.375%, due 2/15/24 | 2,555,000 | 2,822,505 | ||||||
9.625%, due 11/1/21 | 10,349,000 | 12,103,776 | ||||||
Antero Midstream Partners, L.P. / Antero Midstream Finance Corp. | 10,720,000 | 10,452,000 | ||||||
Cheniere Corpus Christi Holdings LLC | 14,380,000 | 14,811,400 | ||||||
Cheniere Energy Partners, L.P. | ||||||||
5.25%, due 10/1/25 | 14,515,000 | 14,242,844 | ||||||
5.625%, due 10/1/26 (e) | 13,680,000 | 13,474,800 | ||||||
CNX Midstream Partners L.P. / CNX Midstream Finance Corp. | 11,000,000 | 10,725,000 | ||||||
Delek Logistics Partners L.P. / Delek Logistics Finance Corp. | 10,445,000 | 10,340,550 | ||||||
Genesis Energy, L.P. / Genesis Energy Finance Corp. | 37,080,000 | 37,265,400 | ||||||
Holly Energy Partners, L.P. / Holly Energy Finance Corp. | 18,000,000 | 18,045,000 | ||||||
MPLX, L.P. | ||||||||
4.875%, due 12/1/24 | 27,495,000 | 28,154,598 | ||||||
4.875%, due 6/1/25 | 30,580,000 | 31,175,934 | ||||||
5.50%, due 2/15/23 | 31,010,000 | 31,422,316 | ||||||
NGPL PipeCo LLC (e) | ||||||||
4.375%, due 8/15/22 | 3,875,000 | 3,826,562 | ||||||
4.875%, due 8/15/27 | 16,630,000 | 16,006,375 | ||||||
NuStar Logistics, L.P. | 13,715,000 | 14,263,600 | ||||||
Rockies Express Pipeline LLC | 15,000,000 | 15,046,875 | ||||||
Sabine Pass Liquefaction LLC | 20,065,000 | 21,301,472 | ||||||
SemGroup Corp. | 7,997,000 | 7,737,097 |
Principal Amount | Value | |||||||
Pipelines (continued) | ||||||||
Semgroup Corp. / Rose Rock Finance Corp. | $ | 6,000,000 | $ | 5,670,000 | ||||
Tallgrass Energy Partners, L.P. / Tallgrass Energy Finance Corp. | 28,235,000 | 28,411,469 | ||||||
Targa Resources Partners, L.P. / Targa Resources Partners Finance Corp. | 14,690,000 | 14,763,450 | ||||||
TransMontaigne Partners, L.P. / TLP Finance Corp. | 13,000,000 | 12,187,500 | ||||||
|
| |||||||
374,250,523 | ||||||||
|
| |||||||
Real Estate 0.9% |
| |||||||
CBRE Services, Inc. | 9,105,000 | 9,425,440 | ||||||
Howard Hughes Corp. | 29,390,000 | 28,214,400 | ||||||
Kennedy-Wilson, Inc. | 21,805,000 | 20,932,800 | ||||||
Realogy Group LLC / Realogy Co-Issuer Corp. | 20,835,000 | 18,855,675 | ||||||
|
| |||||||
77,428,315 | ||||||||
|
| |||||||
Real Estate Investment Trusts 4.1% |
| |||||||
Crown Castle International Corp. | ||||||||
4.875%, due 4/15/22 | 2,000,000 | 2,060,257 | ||||||
5.25%, due 1/15/23 | 69,763,000 | 72,750,974 | ||||||
CTR Partnership LP / CareTrust Capital Corp. | 10,005,000 | 9,754,875 | ||||||
Equinix, Inc. | ||||||||
5.375%, due 1/1/22 | 20,391,000 | 20,798,820 | ||||||
5.375%, due 4/1/23 | 17,525,000 | 17,787,875 | ||||||
5.375%, due 5/15/27 | 52,650,000 | 52,123,500 | ||||||
5.75%, due 1/1/25 | 36,737,000 | 37,425,819 | ||||||
5.875%, due 1/15/26 | 43,725,000 | 44,490,187 | ||||||
MGM Growth Properties Operating Partnership, L.P. / MGP Finance Co-Issuer, Inc. | ||||||||
4.50%, due 9/1/26 | 8,000,000 | 7,240,000 | ||||||
5.625%, due 5/1/24 | 63,960,000 | 64,039,950 | ||||||
MPT Operating Partnership, L.P. / MPT Finance Corp. | 20,025,000 | 18,817,492 | ||||||
Starwood Property Trust, Inc. | 5,000,000 | 4,975,000 | ||||||
|
| |||||||
352,264,749 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Retail 3.9% |
| |||||||
Asbury Automotive Group, Inc. | $ | 56,326,000 | $ | 55,340,295 | ||||
Beacon Roofing Supply, Inc. | 25,140,000 | 22,563,150 | ||||||
Cumberland Farms, Inc. | 20,775,000 | 21,346,312 | ||||||
DriveTime Automotive Group, Inc. / Bridgecrest Acceptance Corp. | 43,301,000 | 44,383,525 | ||||||
Group 1 Automotive, Inc. | ||||||||
5.00%, due 6/1/22 | 16,040,000 | 15,639,000 | ||||||
5.25%, due 12/15/23 (e) | 11,305,000 | 10,881,063 | ||||||
KFC Holding Co. / Pizza Hut Holdings LLC / Taco Bell of America LLC (e) | ||||||||
4.75%, due 6/1/27 | 12,287,000 | 11,549,780 | ||||||
5.00%, due 6/1/24 | 24,855,000 | 24,513,244 | ||||||
5.25%, due 6/1/26 | 34,750,000 | 34,141,875 | ||||||
KGA Escrow, LLC | 13,000,000 | 13,357,500 | ||||||
L Brands, Inc. | ||||||||
5.25%, due 2/1/28 | 8,000,000 | 6,822,400 | ||||||
5.625%, due 2/15/22 | 5,000,000 | 5,050,000 | ||||||
6.694%, due 1/15/27 | 10,587,000 | 9,951,780 | ||||||
Men’s Wearhouse, Inc. | 6,091,000 | 6,243,275 | ||||||
Penske Automotive Group, Inc. | 27,491,000 | 27,869,001 | ||||||
Rite Aid Corp. | 32,040,000 | 27,213,975 | ||||||
|
| |||||||
336,866,175 | ||||||||
|
| |||||||
Semiconductors 0.3% |
| |||||||
Micron Technology, Inc. | 26,142,000 | 26,570,206 | ||||||
|
| |||||||
Software 3.6% |
| |||||||
ACI Worldwide, Inc. | 12,375,000 | 12,375,000 | ||||||
Ascend Learning LLC | 27,000,000 | 26,865,000 | ||||||
CDK Global, Inc. | ||||||||
4.875%, due 6/1/27 | 3,032,000 | 2,838,710 | ||||||
5.875%, due 6/15/26 | 25,380,000 | 25,570,350 | ||||||
Donnelley Financial Solutions, Inc. | 20,475,000 | 21,140,437 | ||||||
Fair Isaac Corp. | 10,650,000 | 10,503,563 | ||||||
First Data Corp. (e) | ||||||||
5.00%, due 1/15/24 | 3,500,000 | 3,456,250 | ||||||
7.00%, due 12/1/23 | 5,000,000 | 5,185,000 |
Principal Amount | Value | |||||||
Software (continued) |
| |||||||
IQVIA, Inc. | $ | 30,113,000 | $ | 29,021,404 | ||||
MSCI, Inc. (e) | ||||||||
4.75%, due 8/1/26 | 13,290,000 | 12,824,850 | ||||||
5.25%, due 11/15/24 | 32,022,000 | 32,262,165 | ||||||
5.375%, due 5/15/27 | 13,510,000 | 13,374,900 | ||||||
5.75%, due 8/15/25 | 41,284,000 | 42,419,310 | ||||||
Open Text Corp. | 10,990,000 | 11,044,950 | ||||||
PTC, Inc. | 48,968,000 | 50,069,780 | ||||||
RP Crown Parent LLC | 10,480,000 | 10,742,000 | ||||||
|
| |||||||
309,693,669 | ||||||||
|
| |||||||
Telecommunications 6.4% |
| |||||||
CenturyLink, Inc. | 28,085,000 | 27,981,085 | ||||||
Cogent Communications Finance, Inc. | 35,015,000 | 35,015,000 | ||||||
Frontier Communications Corp. | ||||||||
10.50%, due 9/15/22 | 19,279,000 | 16,049,768 | ||||||
11.00%, due 9/15/25 | 33,071,000 | 24,224,508 | ||||||
Hughes Satellite Systems Corp. | ||||||||
5.25%, due 8/1/26 | 21,850,000 | 20,757,500 | ||||||
6.625%, due 8/1/26 | 23,275,000 | 22,169,438 | ||||||
7.625%, due 6/15/21 | 31,530,000 | 33,437,565 | ||||||
Inmarsat Finance PLC | 21,020,000 | 20,589,510 | ||||||
QualityTech, L.P. / QTS Finance Corp. | 20,261,000 | 18,893,383 | ||||||
Sprint Capital Corp. | 75,435,000 | 74,209,181 | ||||||
Sprint Communications, Inc. | ||||||||
7.00%, due 3/1/20 (e) | 25,490,000 | 26,414,012 | ||||||
9.00%, due 11/15/18 (e) | 3,523,000 | 3,530,046 | ||||||
9.25%, due 4/15/22 | 16,831,000 | 18,892,798 | ||||||
Sprint Corp. | 20,000,000 | 21,350,000 | ||||||
T-Mobile USA, Inc. | ||||||||
4.00%, due 4/15/22 | 5,000,000 | 4,937,500 | ||||||
4.50%, due 2/1/26 | 5,000,000 | 4,679,700 | ||||||
4.75%, due 2/1/28 | 30,185,000 | 27,921,125 | ||||||
5.125%, due 4/15/25 | 26,615,000 | 26,215,775 | ||||||
5.375%, due 4/15/27 | 29,000,000 | 28,347,500 | ||||||
6.00%, due 4/15/24 | 15,315,000 | 15,697,875 | ||||||
6.375%, due 3/1/25 | 37,982,000 | 39,168,937 | ||||||
6.50%, due 1/15/24 | 14,485,000 | 14,991,975 | ||||||
6.50%, due 1/15/26 | 31,000,000 | 32,627,500 | ||||||
|
| |||||||
558,101,681 | ||||||||
|
|
18 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Textiles 0.3% |
| |||||||
Eagle Intermediate Global Holding B.V. / Ruyi U.S. Finance LLC | $ | 25,015,000 | $ | 24,202,013 | ||||
|
| |||||||
Toys, Games & Hobbies 0.3% |
| |||||||
Mattel, Inc. | 30,050,000 | 28,772,875 | ||||||
|
| |||||||
Trucking & Leasing 0.3% |
| |||||||
Fortress Transportation & Infrastructure Investors LLC | 25,000,000 | 25,562,500 | ||||||
|
| |||||||
Total Corporate Bonds | 7,926,134,728 | |||||||
|
| |||||||
Loan Assignments 1.5% (j) |
| |||||||
Diversified Financial Services 0.2% |
| |||||||
Jane Street Group LLC | ||||||||
2018 Term Loan B | 42,491 | 42,438 | ||||||
2018 Term Loan B | 18,928,587 | 18,904,926 | ||||||
|
| |||||||
18,947,364 | ||||||||
|
| |||||||
Diversified/Conglomerate Service 0.1% |
| |||||||
United Rentals, Inc. Term Loan B TBD, due 10/1/25 | 6,000,000 | 6,026,250 | ||||||
|
| |||||||
Metal Fabricate & Hardware 0.1% |
| |||||||
Neenah Foundry Co. (b)(f) | 5,225,000 | 5,172,750 | ||||||
2017 Term Loan | 5,362,500 | 5,308,875 | ||||||
|
| |||||||
10,481,625 | ||||||||
|
| |||||||
Mining, Steel, Iron & Non-Precious Metals 0.1% |
| |||||||
Aleris International, Inc. | 8,977,500 | 9,044,831 | ||||||
|
|
Principal Amount | Value | |||||||
Oil & Gas 0.2% |
| |||||||
PetroQuest Energy, Inc. | $ | 17,000,000 | $ | 17,000,000 | ||||
|
| |||||||
Retail Stores 0.6% |
| |||||||
Bass Pro Group LLC | 51,941,908 | 51,931,104 | ||||||
|
| |||||||
Transportation 0.2% |
| |||||||
Commercial Barge Line Co. | 23,219,053 | 17,772,258 | ||||||
|
| |||||||
Total Loan Assignments | 131,203,432 | |||||||
|
| |||||||
Total Long-Term Bonds | 8,129,424,169 | |||||||
|
| |||||||
Shares | ||||||||
Common Stocks 0.8% |
| |||||||
Auto Parts & Equipment 0.1% |
| |||||||
Exide Technologies (b)(c)(d)(f)(k) | 2,084,972 | 6,484,263 | ||||||
|
| |||||||
Lodging 0.0%‡ |
| |||||||
Majestic Star Casino LLC Membership Units (c)(d)(f)(k) | 446,020 | 423,719 | ||||||
|
| |||||||
Media 0.0%‡ |
| |||||||
ION Media Networks, | 2,287 | 1,416,316 | ||||||
|
| |||||||
Metals & Mining 0.1% |
| |||||||
Neenah Enterprises, | 720,961 | 9,898,795 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels 0.6% |
| |||||||
PetroQuest Energy, Inc. (k) | 908,262 | 63,578 | ||||||
Rex Energy Corp. (c)(f)(k) | 103,000 | 5,150 | ||||||
Talos Energy, Inc. (k) | 2,074,193 | 54,053,470 | ||||||
Titan Energy LLC (k) | 91,174 | 27,352 | ||||||
|
| |||||||
54,149,550 | ||||||||
|
| |||||||
Total Common Stocks | 72,372,643 | |||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of Investments October 31, 2018 (continued)
Shares | Value | |||||||
Exchange-Traded Funds 0.4% |
| |||||||
iShares Gold Trust (k) | 618,700 | $ | 7,220,229 | |||||
SPDR Gold Shares (k) | 189,000 | 21,763,350 | ||||||
|
| |||||||
Total Exchange-Traded Funds | 28,983,579 | |||||||
|
| |||||||
Short-Term Investment 4.2% |
| |||||||
Investment Company 4.2% |
| |||||||
State Street Institutional U.S. Government Money Market Fund, Premier Class 2.09% (l) | 366,159,273 | 366,159,273 | ||||||
|
| |||||||
Total Short-Term Investment | 366,159,273 | |||||||
|
| |||||||
Total Investments | 98.7 | % | 8,596,939,664 | |||||
Other Assets, Less Liabilities | 1.3 | 110,856,748 | ||||||
Net Assets | 100.0 | % | $ | 8,707,796,412 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | PIK (“Payment-in-Kind”)—issuer may pay interest or dividends with additional securities and/or in cash. |
(b) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(c) | Illiquid security—As of October 31, 2018, the total market value of these securities deemed illiquid under procedures approved by the Board of Trustees was $248,045,213, which represented 2.8% of the Fund’s net assets. (Unaudited) |
(d) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of October 31, 2018, the total market value of fair valued securities was $217,004,790, which represented 2.5% of the Fund’s net assets. |
(e) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(f) | Restricted security (See Note 2(I)). |
(g) | All or a portion of this security was held on loan. As of October 31, 2018, the market value of securities loaned was $16,287,581 and the Fund received non-cash collateral in the form of U.S. Treasury securities with a value of $16,534,098 (See Note 2(H)). |
(h) | Issue in non-accrual status. |
(i) | Issue in default. |
(j) | Floating rate—Rate shown was the rate in effect as of October 31, 2018. |
(k) | Non-income producing security. |
(l) | Current yield as of October 31, 2018. |
The following abbreviations are used in the preceding pages:
LIBOR—London Interbank Offered Rate
SPDR—Standard & Poor’s Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets:
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Convertible Bonds (b) | $ | — | $ | 7,513,914 | $ | 64,572,095 | $ | 72,086,009 | ||||||||
Corporate Bonds (c) | — | 7,808,925,126 | 117,209,602 | 7,926,134,728 | ||||||||||||
Loan Assignments (d) | — | 120,721,807 | 10,481,625 | 131,203,432 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 7,937,160,847 | 192,263,322 | 8,129,424,169 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (e)(f) | 54,149,550 | 423,719 | 17,799,374 | 72,372,643 | ||||||||||||
Exchange-Traded Funds | 28,983,579 | — | — | 28,983,579 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Investment Company | 366,159,273 | — | — | 366,159,273 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 449,292,402 | $ | 7,937,584,566 | $ | 210,062,696 | $ | 8,596,939,664 | ||||||||
|
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|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 securities valued at $64,561,066 and $11,029 are held in Auto Parts & Equipment and Mining, respectively, within the Convertible Bonds section of the Portfolio of Investments. |
(c) | The Level 3 securities valued at $96,059,602 and $21,150,000 are held in Auto Parts & Equipment and Media, respectively, within the Corporate Bonds section of the Portfolio of Investments. |
20 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
(d) | The Level 3 security valued at $10,481,625 is held in Metal Fabricate & Hardware within the Loan Assignments section of the Portfolio of Investments, which was valued by a pricing service without adjustment. |
(e) | The Level 2 security valued at $423,719 is held in Lodging within the Common Stocks section of the Portfolio of Investments. |
(f) | The Level 3 securities valued at $6,484,263, $1,416,316, and $9,898,795 are held in Auto Parts & Equipment, Media, and Metals & Mining, respectively, within the Common Stocks section of the Portfolio of Investments. |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments in | Balance as of October 31, 2017 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of October 31, 2018 | Change in Unrealized Appreciation (Depreciation) from Investments Still Held as of October 31, 2018 (c) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Convertible Bonds | ||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | $ | 54,577,221 | $ | 1,026,696 | $ | — | $ | 1,758,576 | $ | 7,198,573 | (a) | $ | — | $ | — | $ | — | $ | 64,561,066 | $ | 1,758,576 | |||||||||||||||||||
Mining | 10,662 | 824 | — | (457 | ) | — | — | — | — | 11,029 | (457 | ) | ||||||||||||||||||||||||||||
Corporate Bonds | ||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | 80,579,460 | 1,878,323 | — | 6,358,269 | 7,243,550 | (a) | — | — | — | 96,059,602 | 6,358,269 | |||||||||||||||||||||||||||||
Entertainment | 36,312,500 | — | 853,300 | (1,312,500 | ) | — | (35,853,300 | ) | — | — | — | — | ||||||||||||||||||||||||||||
Media | — | 25,713 | — | 1,424,287 | 19,700,000 | — | — | — | 21,150,000 | 1,424,287 | ||||||||||||||||||||||||||||||
Loan Assignments | ||||||||||||||||||||||||||||||||||||||||
Metal Fabricate & Hardware | — | 18,119 | 3,720 | (17,714 | ) | 10,890,000 | (412,500 | )(b) | — | — | 10,481,625 | (17,714 | ) | |||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Auto Parts & Equipment | 3,398,505 | — | — | 3,085,758 | — | — | — | — | 6,484,263 | 3,085,758 | ||||||||||||||||||||||||||||||
Lodging | 423,719 | — | — | — | — | — | — | (423,719 | ) | — | — | |||||||||||||||||||||||||||||
Media | 1,551,935 | — | — | (135,619 | ) | — | — | — | — | 1,416,316 | (135,619 | ) | ||||||||||||||||||||||||||||
Metals & Mining | 8,644,323 | — | — | 1,254,472 | — | — | — | — | 9,898,795 | 1,254,472 | ||||||||||||||||||||||||||||||
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|
| |||||||||||||||||||||
Total | $ | 185,498,325 | $ | 2,949,675 | $ | 857,020 | $ | 12,415,072 | $ | 45,032,123 | $ | (36,265,800 | ) | $ | — | $ | (423,719 | ) | $ | 210,062,696 | $ | 13,727,572 | ||||||||||||||||||
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|
|
(a) | Purchases include PIK securities. |
(b) | Sales include principal reductions. |
(c) | Included in “Net change in unrealized appreciation (depreciation) on investments” in the Statement of Operations. |
As of October 31, 2018, a security with a market value of $423,719 transferred from Level 3 to Level 2 as the price of this security was based on utilizing significant other observable inputs. As of October 31, 2017, the fair value obtained for this security was based on significant unobservable inputs.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Statement of Assets and Liabilities as of October 31, 2018
Assets |
| |||
Investment in securities, at value (identified cost $8,817,080,414) including securities on loan of $16,287,581 | $ | 8,596,939,664 | ||
Cash | 15,464 | |||
Receivables: | ||||
Interest | 143,411,877 | |||
Fund shares sold | 9,552,424 | |||
Investment securities sold | 7,908,697 | |||
Securities lending income | 30,292 | |||
Other assets | 132,273 | |||
|
| |||
Total assets | 8,757,990,691 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 26,125,504 | |||
Investment securities purchased | 11,431,160 | |||
Manager (See Note 3) | 4,153,900 | |||
Transfer agent (See Note 3) | 2,257,539 | |||
NYLIFE Distributors (See Note 3) | 1,298,574 | |||
Shareholder communication | 744,398 | |||
Professional fees | 114,630 | |||
Custodian | 32,224 | |||
Trustees | 21,868 | |||
Accrued expenses | 101,620 | |||
Dividend payable | 3,912,862 | |||
|
| |||
Total liabilities | 50,194,279 | |||
|
| |||
Net assets | $ | 8,707,796,412 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 15,766,860 | ||
Additional paid-in capital | 9,096,674,111 | |||
|
| |||
9,112,440,971 | ||||
Total distributable earnings (loss) | (404,644,559 | ) | ||
|
| |||
Net assets | $ | 8,707,796,412 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 3,290,659,260 | ||
|
| |||
Shares of beneficial interest outstanding | 595,881,852 | |||
|
| |||
Net asset value per share outstanding | $ | 5.52 | ||
Maximum sales charge (4.50% of offering price) | 0.26 | |||
|
| |||
Maximum offering price per share outstanding | $ | 5.78 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 159,970,236 | ||
|
| |||
Shares of beneficial interest outstanding | 28,734,528 | |||
|
| |||
Net asset value per share outstanding | $ | 5.57 | ||
Maximum sales charge (4.50% of offering price) | 0.26 | |||
|
| |||
Maximum offering price per share outstanding | $ | 5.83 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 81,221,384 | ||
|
| |||
Shares of beneficial interest outstanding | 14,775,760 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.50 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 550,818,798 | ||
|
| |||
Shares of beneficial interest outstanding | 100,163,018 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.50 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 3,709,305,708 | ||
|
| |||
Shares of beneficial interest outstanding | 671,154,938 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.53 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 71,558 | ||
|
| |||
Shares of beneficial interest outstanding | 12,972 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.52 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 11,116,007 | ||
|
| |||
Shares of beneficial interest outstanding | 2,012,230 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.52 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 605,572 | ||
|
| |||
Shares of beneficial interest outstanding | 109,772 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.52 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 904,027,889 | ||
|
| |||
Shares of beneficial interest outstanding | 163,840,950 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 5.52 | ||
|
|
22 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 572,114,262 | ||
Dividends | 549,721 | |||
Securities lending | 64,121 | |||
Other | 31,069 | |||
|
| |||
Total income | 572,759,173 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 50,871,855 | |||
Distribution/Service—Class A (See Note 3) | 8,780,505 | |||
Distribution/Service—Investor Class (See Note 3) | 408,582 | |||
Distribution/Service—Class B (See Note 3) | 945,845 | |||
Distribution/Service—Class C (See Note 3) | 6,154,587 | |||
Distribution/Service—Class R2 (See Note 3) | 20,766 | |||
Distribution/Service—Class R3 (See Note 3) | 2,394 | |||
Transfer agent (See Note 3) | 13,406,316 | |||
Shareholder communication | 1,990,257 | |||
Professional fees | 602,050 | |||
Registration | 349,105 | |||
Trustees | 203,167 | |||
Custodian | 56,309 | |||
Shareholder service (See Note 3) | 8,837 | |||
Miscellaneous | 393,819 | |||
|
| |||
Total expenses | 84,194,394 | |||
|
| |||
Net investment income (loss) | 488,564,779 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments |
| |||
Net realized gain (loss) on investments | 111,820,287 | |||
Net change in unrealized appreciation (depreciation) on investments | (468,251,250 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments | (356,430,963 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 132,133,816 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 488,564,779 | $ | 548,987,599 | ||||
Net realized gain (loss) on investments | 111,820,287 | 72,799,100 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (468,251,250 | ) | 66,411,721 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 132,133,816 | 688,198,420 | ||||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (183,893,283 | ) | ||||||
Investor Class | (8,500,000 | ) | ||||||
Class B | (4,233,276 | ) | ||||||
Class C | (27,573,908 | ) | ||||||
Class I | (215,711,694 | ) | ||||||
Class R1 | (2,823 | ) | ||||||
Class R2 | (434,175 | ) | ||||||
Class R3 | (24,035 | ) | ||||||
Class R6 | (54,203,430 | ) | ||||||
|
| |||||||
(494,576,624 | ) | |||||||
|
| |||||||
Dividends to shareholders from net investment income: | ||||||||
Class A | (191,741,233 | ) | ||||||
Investor Class | (14,209,393 | ) | ||||||
Class B | (5,575,422 | ) | ||||||
Class C | (32,240,202 | ) | ||||||
Class I | (289,948,747 | ) | ||||||
Class R1 | (2,677 | ) | ||||||
Class R2 | �� | (537,905 | ) | |||||
Class R3 | (13,936 | ) | ||||||
Class R6 | (18,838,061 | ) | ||||||
|
| |||||||
(553,107,576 | ) | |||||||
|
| |||||||
Distributions to shareholders from return of capital: | ||||||||
Class A | (15,921,400 | ) | (31,015,011 | ) | ||||
Investor Class | (735,926 | ) | (2,298,433 | ) | ||||
Class B | (366,515 | ) | (901,850 | ) | ||||
Class C | (2,387,337 | ) | (5,214,999 | ) | ||||
Class I | (18,676,225 | ) | (46,900,521 | ) | ||||
Class R1 | (244 | ) | (433 | ) | ||||
Class R2 | (37,591 | ) | (87,009 | ) | ||||
Class R3 | (2,081 | ) | (2,254 | ) | ||||
Class R6 | (4,692,909 | ) | (3,047,141 | ) | ||||
|
| |||||||
(42,820,228 | ) | (89,467,651 | ) | |||||
|
| |||||||
Total dividends and distributions to shareholders | (537,396,852 | ) | (642,575,227 | ) | ||||
|
|
2018 | 2017 | |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares (a) | 2,389,951,877 | 4,854,487,899 | ||||||
Net asset value of shares issued in connection with the acquisition of MainStay High Yield Opportunities Fund | — | 317,232,064 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 488,685,533 | 586,154,449 | ||||||
Cost of shares redeemed | (4,146,270,831 | ) | (5,451,117,279 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | $ | (1,267,633,421 | ) | $ | 306,757,133 | |||
|
| |||||||
Net increase (decrease) in net assets
| (1,672,896,457 | ) | 352,380,326 | |||||
Net Assets | ||||||||
Beginning of year | 10,380,692,869 | 10,028,312,543 | ||||||
|
| |||||||
End of year(2) | $ | 8,707,796,412 | $ | 10,380,692,869 | ||||
|
|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $(11,523,635) in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
(a) | Includes in-kind subscriptions in the amount of $11,683,015 during the year ended October 31, 2017. (See Note 11) |
24 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.29 | 0.30 | 0.33 | 0.31 | 0.34 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.22 | ) | 0.09 | 0.20 | (0.31 | ) | (0.09 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.07 | 0.39 | 0.53 | 0.00 | ‡ | 0.25 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.29 | ) | (0.31 | ) | (0.34 | ) | (0.31 | ) | (0.40 | ) | ||||||||||
Return of capital | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.32 | ) | (0.36 | ) | (0.36 | ) | (0.36 | ) | (0.40 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 1.29 | % | 6.91 | % | 9.96 | % | 0.06 | % | 4.14 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 5.15 | % | 5.25 | % | 5.98 | % | 5.45 | % | 5.52 | % | ||||||||||
Net expenses (c) | 0.99 | % | 0.97 | % | 0.95 | % | 0.96 | % | 0.99 | % | ||||||||||
Portfolio turnover rate | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 3,290,659 | $ | 3,683,113 | $ | 3,551,864 | $ | 3,364,517 | $ | 3,678,466 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 5.82 | $ | 5.79 | $ | 5.62 | $ | 5.99 | $ | 6.14 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.29 | 0.30 | 0.33 | 0.31 | 0.34 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.22 | ) | 0.09 | 0.20 | (0.31 | ) | (0.09 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.07 | 0.39 | 0.53 | (0.00 | )‡ | 0.25 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.29 | ) | (0.31 | ) | (0.34 | ) | (0.32 | ) | (0.40 | ) | ||||||||||
Return of capital | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.32 | ) | (0.36 | ) | (0.36 | ) | (0.37 | ) | (0.40 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 5.57 | $ | 5.82 | $ | 5.79 | $ | 5.62 | $ | 5.99 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 1.29 | % | 6.90 | % | 9.91 | % | (0.07 | %) | 4.13 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 5.12 | % | 5.21 | % | 5.90 | % | 5.39 | % | 5.50 | % | ||||||||||
Net expenses (c) | 1.03 | % | 1.02 | % | 1.03 | % | 1.02 | % | 1.01 | % | ||||||||||
Portfolio turnover rate | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 159,970 | $ | 167,139 | $ | 287,493 | $ | 282,451 | $ | 296,535 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 5.74 | $ | 5.71 | $ | 5.54 | $ | 5.90 | $ | 6.05 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.25 | 0.26 | 0.28 | 0.27 | 0.29 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.21 | ) | 0.08 | 0.20 | (0.32 | ) | (0.09 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.04 | 0.34 | 0.48 | (0.05 | ) | 0.20 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.26 | ) | (0.27 | ) | (0.29 | ) | (0.26 | ) | (0.35 | ) | ||||||||||
Return of capital | (0.02 | ) | (0.04 | ) | (0.02 | ) | (0.05 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.28 | ) | (0.31 | ) | (0.31 | ) | (0.31 | ) | (0.35 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 5.50 | $ | 5.74 | $ | 5.71 | $ | 5.54 | $ | 5.90 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 0.64 | % | 6.06 | % | 8.85 | % | (0.60 | %) | 3.35 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 4.37 | % | 4.47 | % | 5.16 | % | 4.64 | % | 4.75 | % | ||||||||||
Net expenses (c) | 1.78 | % | 1.77 | % | 1.78 | % | 1.77 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 81,221 | $ | 108,263 | $ | 132,509 | $ | 139,683 | $ | 172,640 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 5.74 | $ | 5.72 | $ | 5.55 | $ | 5.90 | $ | 6.05 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.25 | 0.26 | 0.28 | 0.27 | 0.29 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.21 | ) | 0.07 | 0.20 | (0.31 | ) | (0.09 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.04 | 0.33 | 0.48 | (0.04 | ) | 0.20 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.26 | ) | (0.27 | ) | (0.29 | ) | (0.26 | ) | (0.35 | ) | ||||||||||
Return of capital | (0.02 | ) | (0.04 | ) | (0.02 | ) | (0.05 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.28 | ) | (0.31 | ) | (0.31 | ) | (0.31 | ) | (0.35 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 5.50 | $ | 5.74 | $ | 5.72 | $ | 5.55 | $ | 5.90 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 0.64 | % | 5.87 | % | 9.04 | % | (0.60 | %) | 3.34 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 4.36 | % | 4.45 | % | 5.15 | % | 4.64 | % | 4.75 | % | ||||||||||
Net expenses (c) | 1.78 | % | 1.77 | % | 1.78 | % | 1.77 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 550,819 | $ | 676,463 | $ | 678,364 | $ | 679,392 | $ | 785,873 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
26 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class I | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 5.78 | $ | 5.75 | $ | 5.58 | $ | 5.94 | $ | 6.08 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.31 | 0.32 | 0.34 | 0.33 | 0.35 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.22 | ) | 0.08 | 0.20 | (0.31 | ) | (0.08 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.09 | 0.40 | 0.54 | 0.02 | 0.27 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.31 | ) | (0.32 | ) | (0.35 | ) | (0.33 | ) | (0.41 | ) | ||||||||||
Return of capital | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.34 | ) | (0.37 | ) | (0.37 | ) | (0.38 | ) | (0.41 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 5.53 | $ | 5.78 | $ | 5.75 | $ | 5.58 | $ | 5.94 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 1.57 | % | 7.17 | % | 10.23 | % | 0.32 | % | 4.58 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 5.40 | % | 5.51 | % | 6.23 | % | 5.70 | % | 5.76 | % | ||||||||||
Net expenses (c) | 0.74 | % | 0.72 | % | 0.70 | % | 0.71 | % | 0.74 | % | ||||||||||
Portfolio turnover rate | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 3,709,306 | $ | 4,067,560 | $ | 5,313,266 | $ | 4,844,891 | $ | 3,762,169 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Class R1 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.30 | 0.32 | 0.34 | 0.32 | 0.34 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.22 | ) | 0.07 | 0.19 | (0.31 | ) | (0.08 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.08 | 0.39 | 0.53 | 0.01 | 0.26 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.30 | ) | (0.31 | ) | (0.34 | ) | (0.32 | ) | (0.41 | ) | ||||||||||
Return of capital | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.33 | ) | (0.36 | ) | (0.36 | ) | (0.37 | ) | (0.41 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 1.46 | % | 7.07 | % | 10.13 | % | 0.21 | % | 4.31 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 5.25 | % | 5.48 | % | 6.11 | % | 5.60 | % | 5.66 | % | ||||||||||
Net expenses (c) | 0.84 | % | 0.82 | % | 0.80 | % | 0.81 | % | 0.84 | % | ||||||||||
Portfolio turnover rate | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 72 | $ | 37 | $ | 59 | $ | 39 | $ | 29 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R1 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class R2 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | $ | 6.08 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.29 | 0.30 | 0.32 | 0.31 | 0.33 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.22 | ) | 0.08 | 0.20 | (0.31 | ) | (0.09 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | — | — | 0.00 | ‡ | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.07 | 0.38 | 0.52 | (0.00 | )‡ | 0.24 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.29 | ) | (0.30 | ) | (0.33 | ) | (0.31 | ) | (0.39 | ) | ||||||||||
Return of capital | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.32 | ) | (0.35 | ) | (0.35 | ) | (0.36 | ) | (0.39 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.57 | $ | 5.93 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 1.20 | % | 6.80 | % | 9.83 | % | (0.04 | %) | 4.04 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 5.06 | % | 5.16 | % | 5.89 | % | 5.35 | % | 5.43 | % | ||||||||||
Net expenses (c) | 1.09 | % | 1.07 | % | 1.05 | % | 1.06 | % | 1.09 | % | ||||||||||
Portfolio turnover rate | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 11,116 | $ | 9,562 | $ | 10,917 | $ | 10,084 | $ | 11,049 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | February 29, 2016** through October 31, | |||||||||||
Class R3 | 2018 | 2017 | 2016 | |||||||||
Net asset value at beginning of period | $ | 5.77 | $ | 5.74 | $ | 5.17 | ||||||
|
|
|
|
|
| |||||||
Net investment income (loss) (a) | 0.27 | 0.28 | 0.20 | |||||||||
Net realized and unrealized gain (loss) on investments | (0.22 | ) | 0.09 | 0.60 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | 0.05 | 0.37 | 0.80 | |||||||||
|
|
|
|
|
| |||||||
Less dividends and distributions: | ||||||||||||
From net investment income | (0.28 | ) | (0.29 | ) | (0.21 | ) | ||||||
Return of capital | (0.02 | ) | (0.05 | ) | (0.02 | ) | ||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.30 | ) | (0.34 | ) | (0.23 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value at end of period | $ | 5.52 | $ | 5.77 | $ | 5.74 | ||||||
|
|
|
|
|
| |||||||
Total investment return (b) | 0.96 | % | 6.58 | % | 15.59 | % | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Net investment income (loss) | 4.77 | % | 4.81 | % | 5.40 | %†† | ||||||
Net expenses (c) | 1.34 | % | 1.32 | % | 1.30 | %†† | ||||||
Portfolio turnover rate | 30 | % | 43 | % | 41 | % | ||||||
Net assets at end of period (in 000’s) | $ | 606 | $ | 392 | $ | 130 |
** | Inception date. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
28 | MainStay MacKay High Yield Corporate Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class R6 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 5.77 | $ | 5.74 | $ | 5.58 | $ | 5.94 | $ | 6.09 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.31 | 0.32 | 0.35 | 0.34 | 0.36 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.21 | ) | 0.09 | 0.19 | (0.31 | ) | (0.08 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.10 | 0.41 | 0.54 | 0.03 | 0.28 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.32 | ) | (0.33 | ) | (0.36 | ) | (0.34 | ) | (0.43 | ) | ||||||||||
Return of capital | (0.03 | ) | (0.05 | ) | (0.02 | ) | (0.05 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.35 | ) | (0.38 | ) | (0.38 | ) | (0.39 | ) | (0.43 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 5.52 | $ | 5.77 | $ | 5.74 | $ | 5.58 | $ | 5.94 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 1.71 | % | 7.36 | % | 10.24 | % | 0.50 | % | 4.60 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 5.54 | % | 5.45 | % | 6.23 | % | 5.84 | % | 5.88 | % | ||||||||||
Net expenses (c) | 0.58 | % | 0.58 | % | 0.58 | % | 0.58 | % | 0.58 | % | ||||||||||
Portfolio turnover rate | 30 | % | 43 | % | 41 | % | 38 | % | 41 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 904,028 | $ | 1,668,163 | $ | 53,712 | $ | 15,017 | $ | 9,093 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R6 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay High Yield Corporate Bond Fund (formerly known as MainStay High Yield Corporate Bond Fund) (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has ten classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Class R2 shares were first offered to the public on December 14, 2007, but did not commence operations until May 1, 2008. Investor Class shares commenced operations on February 28, 2008. Class R1 shares commenced operations on June 29, 2012. Class R6 shares commenced operations on June 17, 2013. Class R3 shares commenced operations on February 29, 2016. Class T shares of the Fund were registered for sale effective as of February 28, 2017. As of October 31, 2018, Class T shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of
such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I, Class R1, Class R2, Class R3 and Class R6 shares are offered at NAV without a sales charge. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class R2, Class R3 and Class T shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee. Class R1, Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seek maximum current income through investment in a diversified portfolio of high-yield debt securities. Capital appreciation is a secondary objective.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation
30 | MainStay MacKay High Yield Corporate Bond Fund |
Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner
31 |
Notes to Financial Statements (continued)
are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Equity securities, including shares of exchange-traded funds (“ETFs”), are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Loan assignments, participations and commitments are valued at the average of bid quotations obtained from the engaged independent pricing service and are generally categorized as Level 2 in the hierarchy. Certain loan assignments, participations and commitments may be valued by utilizing significant unobservable inputs obtained from the pricing service and are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
The valuation techniques and significant amounts of unobservable inputs used in the fair valuation measurement of the Fund’s Level 3 securities are outlined in the table below. A significant increase or decrease in any of those inputs in isolation would result in a significantly higher or lower fair value measurement.
Asset | Fair Value at 10/31/18* | Valuation Technique | Unobservable Inputs | Inputs/ Range | ||||||||
Convertible Bond | $ | 64,561,066 | Market Approach | Estimated Enterprise Value | | $1,046.80m– $1,193.10m | ||||||
11,029 | Income Approach | Liquidity Discount | 100bps | |||||||||
Subordination Discount | 150bps | |||||||||||
Corporate Bonds | 96,059,602 | Income Approach | Estimated Yield to Maturity | 16.20 | % | |||||||
Spread Adjustment | 3.28 | % | ||||||||||
Common Stocks | 6,484,263 | Market Approach | Estimated Enterprise Value | | $1,046.80m– $1,193.10m | |||||||
Estimated Volatility | 20.00 | % | ||||||||||
1,416,316 | Market Approach | Terminal Value Multiple | 9.0x | |||||||||
Liquidity Discount | 20.00 | % | ||||||||||
9,898,795 | Market Approach | EBITDA Multiple | 5.75x | |||||||||
Discount Rate | 10.00 | % | ||||||||||
|
| |||||||||||
$ | 178,431,071 | |||||||||||
|
|
* | The table above does not include Level 3 investments that were valued by brokers without adjustment. As of October 31, 2018, the value of these investments were $31,631,625. The inputs for these investments were not readily available or cannot be reasonably estimated. |
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or the Subadvisor determine the liquidity of the Fund’s investments; in doing so,
32 | MainStay MacKay High Yield Corporate Bond Fund |
the Manager or the Subadvisor may consider various factors, including (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of October 31, 2018 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of October 31, 2018, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities. Income from payment-in-kind securities is accreted daily based on the effective interest method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in ETFs and mutual funds, which are subject to management fees and other fees that may increase the costs of investing in ETFs and mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of ETFs and mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Loan Assignments, Participations and Commitments. The Fund may invest in loan assignments and participations (“loans”). Commitments are agreements to make money available to a borrower in a specified amount, at a specified rate and within a specified time. The Fund records an investment when the borrower withdraws money on a commitment or when a funded loan is purchased (trade date) and records interest as earned. These loans pay interest at rates that are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London Interbank Offered Rate (“LIBOR”).
The loans in which the Fund may invest are generally readily marketable, but may be subject to some restrictions on resale. For example, the Fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments. If the Fund purchases an assignment from a lender, the Fund will generally have direct contractual rights against the borrower in favor of the lender. If the Fund purchases a participation interest either from a lender or a participant, the Fund typically will have established a direct contractual relationship with the seller of the participation interest, but not with the borrower. Consequently, the Fund is subject to the credit risk of the lender or participant who sold the participation interest to the Fund, in addition to the usual credit risk of the borrower. In the event that the borrower, selling participant or intermediate participants become
33 |
Notes to Financial Statements (continued)
insolvent or enter into bankruptcy, the Fund may incur certain costs and delays in realizing payment, or may suffer a loss of principal and/or interest.
Unfunded commitments represent the remaining obligation of the Fund to the borrower. At any point in time, up to the maturity date of the issue, the borrower may demand the unfunded portion. Unfunded amounts, if any, are marked to market and any unrealized gains or losses are recorded in the Statement of Assets and Liabilities. As of October 31, 2018, the Fund did not hold any unfunded commitments.
(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activity, if any, is reflected in the Statement of Operations. As of October 31, 2018, the Fund had securities on loan with a value of $16,287,581 and had received non-cash collateral in the form of U.S. Treasury securities with a value of $16,534,098.
(I) Restricted Securities. Restricted securities, as disclosed in Note 5, are securities which have been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933, as amended. Disposal of these securities may involve time-consuming negotiations and expenses, and it may be difficult to obtain a prompt sale at an acceptable price.
(J) Debt Securities and Loan Risk. The Fund primarily invests in high-yield debt securities (commonly referred to as “junk bonds”), which are considered speculative because they present a greater risk of loss, including default, than higher rated debt securities. These securities pay investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility. In times of unusual or adverse market, economic or political conditions, these securities may experience higher than normal default rates.
The loans in which the Fund invests are usually rated below investment grade, or if unrated, determined by the Subadvisor to be of comparable quality (commonly referred to as “junk bonds”) and are generally
considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. Moreover, such securities may, under certain circumstances, be particularly susceptible to liquidity and valuation risks. Although certain loans are collateralized, there is no guarantee that the value of the collateral will be sufficient or available to satisfy the borrower’s obligation. In times of unusual or advers market, economic or political conditions, loans may experience higher than normal default rates. In the event of a recession or serious credit event, among other eventualities, the value of the Fund’s investments in loans are more likely to decline. The secondary market for loans is limited and, thus, the Fund’s ability to sell or realize the full value of its investment in these loans to reinvest sale proceeds or to meet redemption obligations may be impaired. In addition, loans generally are subject to extended settlement periods that may be longer than seven days. As a result, the Fund may be adversely affected by selling other investments at an unfavorable time and/or under unfavorable conditions or engaging in borrowing transactions, such as borrowing against its credit facility, to raise cash to meet redemption obligations or pursue other investment opportunities.
In certain circumstances, loans may not be deemed to be securities. As a result, the Fund may not have the protection of the anti-fraud provisions of the federal securities laws. In such cases, the Fund generally must rely on the contractual provisions in the loan agreement and common-law fraud protections under applicable state law.
(K) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory
34 | MainStay MacKay High Yield Corporate Bond Fund |
Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.60% up to $500 million; 0.55% from $500 million up to $5 billion; 0.525% from $5 billion up to $7 billion; 0.50% from $7 billion up to $10 billion; 0.49% from $10 billion to $15 billion; and 0.48% in excess of $15 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million.
Prior to February 28, 2018, the Fund paid the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.60% up to $500 million; 0.55% from $500 million up to $5 billion; 0.525% from $5 billion up to $7 billion; 0.50% from $7 billion up to $10 billion; and 0.49% in excess of $10 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the year ended October 31, 2018, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.55% inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
New York Life Investments has contractually agreed to waive fees and/ or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $50,871,855.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R1, Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R1, Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the year ended October 31, 2018, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 52 | ||
Class R2 | 8,306 | |||
Class R3 | 479 |
(C) Sales Charges. During the year ended October 31, 2018, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $721,299 and $79,211, respectively.
During the year ended October 31, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $82,144, $12, $110,370 and $28,292, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company
35 |
Notes to Financial Statements (continued)
LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 5,521,093 | ||
Investor Class | 312,140 | |||
Class B | 180,810 | |||
Class C | 1,176,146 | |||
Class I | 6,202,233 | |||
Class R1 | 82 | |||
Class R2 | 13,056 | |||
Class R3 | 756 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Capital. As of October 31, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class I | $ | 938,976 | 0.0 | %‡ | ||||
Class R1 | 35,113 | 49.1 |
‡ | Less than one-tenth of a percent. |
Note 4–Federal Income Tax
As of October 31, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 8,817,796,407 | $ | 118,612,139 | $ | (339,468,882 | ) | $ | (220,856,743 | ) |
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary Income | Accumulated Capital and Other Gain (Loss) | Other Temporary Differences | Unrealized Appreciation (Depreciation) | Total Accumulated Gain (Loss) | ||||
$— | $(166,082,864) | $(17,704,952) | $(220,856,743) | $(404,644,559) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily due to wash sale adjustments. The other temporary differences are primarily due to dividends payable and defaulted bond income accruals.
The following table discloses the current year reclassifications between total distributable earnings (loss) and additional paid-in capital arising from permanent differences; net assets as of October 31, 2018 were not affected.
Total Distributable Earnings (Loss) | Additional Paid-In Capital | |||||
$ | 6,126 | $ | (6,126 | ) |
The reclassifications for the Fund are primarily due to prior year post-financial statement adjustments.
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards of $166,082,864 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||||||
Unlimited | $ | 18,952 | $ | 147,131 |
The Fund utilized $111,746,196 of capital loss carryforwards during the year ended October 31, 2018.
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 494,576,624 | $ | 553,107,576 | ||||
Return of Capital | 42,820,228 | 89,467,651 | ||||||
Total | $ | 537,396,852 | $ | 642,575,227 |
36 | MainStay MacKay High Yield Corporate Bond Fund |
Note 5–Restricted Securities
As of October 31, 2018, the Fund held the following restricted securities.
Security | Date(s) of Acquisition | Principal Amount/ Shares | Cost | 10/31/18 Value | Percent of Net Assets | |||||||||||||||
Aleris International, Inc. | ||||||||||||||||||||
Convertible Bond 6.00%, due 6/1/20 | 7/6/10 | $ | 11,797 | $ | 10,208 | $ | 11,029 | 0.0 | %‡ | |||||||||||
Exide Technologies | 4/30/15-9/29/17 | 2,084,972 | 53,289,038 | 6,484,263 | 0.1 | |||||||||||||||
ION Media Networks, Inc. | 3/12/10-9/29/17 | 2,287 | 13,572 | 1,416,316 | 0.0 | ‡ | ||||||||||||||
Majestic Star Casino LLC | 12/1/11 | 446,020 | 892,040 | 423,719 | 0.0 | ‡ | ||||||||||||||
Neenah Enterprises, Inc. | 7/29/10-9/29/17 | 720,961 | 6,114,571 | 9,898,795 | 0.1 | |||||||||||||||
Neenah Foundry Co. | 12/8/17 | $ | 10,587,500 | 10,499,339 | 10,481,625 | 0.1 | ||||||||||||||
PetroQuest Energy, Inc. | 8/30/18 | $ | 17,000,000 | 17,000,000 | 17,000,000 | 0.2 | ||||||||||||||
Rex Energy Corp. | 4/7/16 | 103,000 | 11,698,987 | 5,150 | 0.0 | ‡ | ||||||||||||||
Sterling Entertainment Enterprises LLC | 12/28/17 | $ | 20,000,000 | 19,725,713 | 21,150,000 | 0.2 | ||||||||||||||
Total | $ | 119,243,468 | $ | 66,870,897 | 0.7 | % |
‡ | Less than one-tenth of a percent. |
Note 6–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and
the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to July 31, 2018, the aggregate commitment amount and the commitment fee were the same as those under the current Credit Agreement. During the year ended October 31, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the year ended October 31, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 9–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2018, purchases and sales of securities, other than short-term securities, were $2,646,652 and $3,814,679, respectively.
37 |
Notes to Financial Statements (continued)
Note 10–Capital Share Transactions
Class A | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 81,948,283 | $ | 465,649,820 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 30,329,032 | 171,300,889 | ||||||
Shares redeemed | (158,819,289 | ) | (900,311,177 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (46,541,974 | ) | (263,360,468 | ) | ||||
Shares converted into Class A (See Note 1) | 5,744,195 | 32,610,430 | ||||||
Shares converted from Class A (See Note 1) | (1,592,187 | ) | (8,989,832 | ) | ||||
|
| |||||||
Net increase (decrease) | (42,389,966 | ) | $ | (239,739,870 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 137,960,535 | $ | 796,510,493 | |||||
Shares issued in connection with the acquisition of MainStay High Yield Opportunities Fund | 10,796,682 | 62,812,936 | ||||||
Shares issued to shareholders in reinvestment of dividends and distributions | 33,255,027 | 191,827,227 | ||||||
Shares redeemed | (185,358,822 | ) | (1,070,313,899 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (3,346,578 | ) | (19,163,243 | ) | ||||
Shares converted into Class A (See Note 1) | 27,937,559 | 162,107,881 | ||||||
Shares converted from Class A (See Note 1) | (4,923,114 | ) | (28,586,448 | ) | ||||
|
| |||||||
Net increase (decrease) | 19,667,867 | $ | 114,358,190 | |||||
|
|
|
| |||||
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,462,654 | $ | 19,807,574 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | �� | 1,534,158 | 8,733,134 | |||||
Shares redeemed | 329,300 | 1,761,792 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 5,326,112 | 30,302,500 | ||||||
Shares converted into Investor Class (See Note 1) | 1,908,695 | 10,887,820 | ||||||
Shares converted from Investor Class (See Note 1) | (7,232,626 | ) | (41,236,187 | ) | ||||
|
| |||||||
Net increase (decrease) | 2,181 | $ | (45,867 | ) | ||||
| �� | |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 5,619,055 | $ | 32,742,492 | |||||
Shares issued in connection with the acquisition of MainStay High Yield Opportunities Fund | 883,418 | 5,181,248 | ||||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,644,158 | 15,376,930 | ||||||
Shares redeemed | (5,651,793 | ) | (32,923,120 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 3,494,838 | 20,377,550 | ||||||
Shares converted into Investor Class (See Note 1) | 2,275,619 | 13,254,259 | ||||||
Shares converted from Investor Class (See Note 1) | (26,698,350 | ) | (156,019,665 | ) | ||||
|
| |||||||
Net increase (decrease) | (20,927,893 | ) | $ | (122,387,856 | ) | |||
|
|
Class B | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 241,451 | $ | 1,359,738 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 726,768 | 4,087,799 | ||||||
Shares redeemed | (3,336,932 | ) | (18,825,570 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (2,368,713 | ) | (13,378,033 | ) | ||||
Shares converted from Class B (See Note 1) | (1,708,658 | ) | (9,645,332 | ) | ||||
|
| |||||||
Net increase (decrease) | (4,077,371 | ) | $ | (23,023,365 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 889,619 | $ | 5,102,460 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,005,592 | 5,771,859 | ||||||
Shares redeemed | (4,238,908 | ) | (24,373,758 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (2,343,697 | ) | (13,499,439 | ) | ||||
Shares converted into Class B (See Note 1) | 562 | 3,201 | ||||||
Shares converted from Class B (See Note 1) | (1,994,735 | ) | (11,476,196 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (4,337,870 | ) | $ | (24,972,434 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 6,368,864 | $ | 36,031,045 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,736,234 | 26,644,143 | ||||||
Shares redeemed | (28,673,897 | ) | (161,805,598 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (17,568,799 | ) | (99,130,410 | ) | ||||
Shares converted from Class C (See Note 1) | (19,545 | ) | (111,523 | ) | ||||
|
| |||||||
Net increase (decrease) | (17,588,344 | ) | $ | (99,241,933 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 13,097,649 | $ | 75,284,450 | |||||
Shares issued in connection with the acquisition of MainStay High Yield Opportunities Fund | 12,822,216 | 74,236,783 | ||||||
Shares issued to shareholders in reinvestment of dividends and distributions | 5,581,771 | 32,066,658 | ||||||
Shares redeemed | (32,264,507 | ) | (185,641,594 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (762,871 | ) | (4,053,703 | ) | ||||
Shares converted from Class C (See Note 1) | (160,698 | ) | (922,248 | ) | ||||
|
| |||||||
Net increase (decrease) | (923,569 | ) | $ | (4,975,951 | ) | |||
|
|
|
| |||||
38 | MainStay MacKay High Yield Corporate Bond Fund |
Class I | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 245,498,090 | $ | 1,396,789,903 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 38,706,098 | 218,802,565 | ||||||
Shares redeemed | (314,348,256 | ) | (1,783,949,641 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (30,144,068 | ) | (168,357,173 | ) | ||||
Shares converted into Class I (See Note 1) | 391,168 | 2,200,247 | ||||||
Shares converted from Class I (See Note 1) | (3,296,534 | ) | (18,850,230 | ) | ||||
|
| |||||||
Net increase (decrease) | (33,049,434 | ) | $ | (185,007,156 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold (a) | 399,617,814 | $ | 2,309,616,788 | |||||
Shares issued in connection with the acquisition of MainStay High Yield Opportunities Fund | 30,051,743 | 175,001,097 | ||||||
Shares issued to shareholders in reinvestment of dividends and distributions | 55,184,195 | 318,761,441 | ||||||
Shares redeemed | (709,292,405 | ) | (4,099,545,620 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (224,438,653 | ) | (1,296,166,294 | ) | ||||
Shares converted into Class I (See Note 1) | 3,985,779 | 23,178,011 | ||||||
|
| |||||||
Net increase (decrease) | (220,452,874 | ) | $ | (1,272,988,283 | ) | |||
|
|
|
| |||||
(a) Includes in-kind subscriptions in the amount of $11,683,015 during the year ended October 31, 2017. (See Note 11) |
| |||||||
Class R1 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 10,062 | $ | 56,569 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 545 | 3,067 | ||||||
Shares redeemed | (4,085 | ) | (23,088 | ) | ||||
|
| |||||||
Net increase (decrease) | 6,522 | $ | 36,548 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 599 | $ | 3,456 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 540 | 3,110 | ||||||
Shares redeemed | (4,902 | ) | (28,556 | ) | ||||
|
| |||||||
Net increase (decrease) | (3,763 | ) | $ | (21,990 | ) | |||
|
|
|
| |||||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,044,931 | $ | 5,911,911 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 67,315 | 379,990 | ||||||
Shares redeemed | (752,554 | ) | (4,287,056 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 359,692 | 2,004,845 | ||||||
Shares converted from Class R2 (See Note 1) | (3,959 | ) | (22,765 | ) | ||||
|
| |||||||
Net increase (decrease) | 355,733 | $ | 1,982,080 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 326,120 | $ | 1,884,122 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 81,384 | 469,649 | ||||||
Shares redeemed | (651,458 | ) | (3,769,543 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (243,954 | ) | (1,415,772 | ) | ||||
Shares converted from Class R2 (See Note 1) | (260 | ) | (1,507 | ) | ||||
|
| |||||||
Net increase (decrease) | (244,214 | ) | $ | (1,417,279 | ) | |||
|
|
|
| |||||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 72,058 | $ | 405,797 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,011 | 22,580 | ||||||
Shares redeemed | (34,326 | ) | (194,435 | ) | ||||
|
| |||||||
Net increase (decrease) | 41,743 | $ | 233,942 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 83,301 | $ | 481,206 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,416 | 13,944 | ||||||
Shares redeemed | (28,201 | ) | (162,967 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 57,516 | 332,183 | ||||||
Shares converted from Class R3 (See Note 1) | (12,048 | ) | (69,759 | ) | ||||
|
| |||||||
Net increase (decrease) | 45,468 | $ | 262,424 | |||||
|
|
|
|
39 |
Notes to Financial Statements (continued)
Class R6 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 82,006,063 | $ | 463,939,520 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 10,375,321 | 58,711,366 | ||||||
Shares redeemed | (223,634,790 | ) | (1,278,636,058 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (131,253,406 | ) | (755,985,172 | ) | ||||
Shares converted into Class R6 (See Note 1) | 7,245,330 | 41,236,187 | ||||||
Shares converted from Class R6 (See Note 1) | (1,420,510 | ) | (8,078,815 | ) | ||||
|
| |||||||
Net increase (decrease) | (125,428,586 | ) | $ | (722,827,800 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 282,318,578 | $ | 1,632,862,432 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,784,191 | 21,863,631 | ||||||
Shares redeemed | (5,937,095 | ) | (34,358,222 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 280,165,674 | 1,620,367,841 | ||||||
Shares converted from Class R6 (See Note 1) | (253,219 | ) | (1,467,529 | ) | ||||
|
| |||||||
Net increase (decrease) | 279,912,455 | $ | 1,618,900,312 | |||||
|
|
|
|
Note 11–In-Kind Transfer of Securities
During the year ended October 31, 2017, the Fund received shares of beneficial interest in exchange for securities. Cash and securities were transferred at their current value on the date of the transaction.
Transaction Date | Shares | Value | ||
9/29/17 | 2,014,313 | $11,683,015 |
Note 12–Fund Acquisitions
MainStay High Yield Opportunities Fund
At a meeting held on November 1-2, 2016, the Board approved an Agreement and Plan of Reorganization providing for the acquisition of the assets and liabilities of the MainStay High Yield Opportunities Fund, a series of MainStay Funds Trust, by the Fund, in exchange for shares of the Fund, followed by the complete liquidation of the MainStay High Yield Opportunities Fund (the “Reorganization”). The Reorganization was completed on February 17, 2017. The aggregate net assets of the Fund immediately before the acquisition were $10,459,740,548 and the combined net assets after the acquisition were $10,776,972,612.
The chart below shows a summary of net assets, shares outstanding, net unrealized appreciation/(depreciation), undistributed net investment
income and accumulated net realized gains/(losses), before and after the reorganization.
Before Reorganization | After Reorganization | |||||||||||
MainStay High Yield Opportunities Fund | MainStay High Yield Corporate Bond Fund | MainStay High Yield Corporate Bond Fund | ||||||||||
Net Assets: | ||||||||||||
Class A | $ | 62,812,936 | $ | 3,593,566,219 | $ | 3,656,379,155 | ||||||
Investor Class | 5,181,248 | 288,079,044 | 293,260,292 | |||||||||
Class B | — | 130,694,661 | 130,694,661 | |||||||||
Class C | 74,236,783 | 671,406,491 | 745,643,274 | |||||||||
Class I | 175,001,097 | 5,700,715,046 | 5,875,716,143 | |||||||||
Class R1 | — | 62,081 | 62,081 | |||||||||
Class R2 | — | 10,841,706 | 10,841,706 | |||||||||
Class R3 | — | 222,918 | 222,918 | |||||||||
Class R6 | — | 64,152,382 | 64,152,382 | |||||||||
Shares Outstanding: | ||||||||||||
Class A | 5,800,751 | 617,686,243 | 628,482,926 | |||||||||
Investor Class | 480,906 | 49,118,183 | 50,001,601 | |||||||||
Class B | — | 22,582,583 | 22,582,583 | |||||||||
Class C | 6,885,751 | 115,964,747 | 128,786,963 | |||||||||
Class I | 16,123,153 | 978,944,874 | 1,008,996,752 | |||||||||
Class R1 | — | 10,674 | 10,674 | |||||||||
Class R2 | — | 1,862,964 | 1,862,964 | |||||||||
Class R3 | — | 38,332 | 38,332 | |||||||||
Class R6 | — | 11,028,891 | 11,028,891 | |||||||||
Net unrealized appreciation/(depreciation) | 10,328,312 | 276,337,007 | 286,665,319 | |||||||||
Undistributed net investment income | 251,519 | 1,327,073 | 1,327,073 | |||||||||
Accumulated net realized gain/(loss) | (78,971,873 | ) | (248,958,072 | ) | (248,958,072 | ) |
Assuming the acquisition of MainStay High Yield Opportunities Fund had been completed on November 1, 2016, the beginning of the annual reporting period of the Fund, the Fund’s pro forma results of operations for the year ended October 31, 2017, were as follows:
Net investment income | $ | 553,923,686 | ||
Net gain on investments | 145,265,223 | |||
Net increase in net assets resulting from operations | $ | 699,188,909 |
Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the MainStay High Yield Opportunities Fund that have been included in the Fund’s Statement of Operations since February 17, 2017.
For financial reporting purposes, assets received, and shares issued by the Fund were recorded at fair value; however, the cost basis of the investments received from MainStay High Yield Opportunities Fund, in the amount of $301,102,166, was carried forward to align ongoing reporting of the Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes. The Fund acquired capital loss carryovers of $78,386,195 (subject to future annual limitations).
40 | MainStay MacKay High Yield Corporate Bond Fund |
Note 13–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
Note 14–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
41 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The MainStay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MainStay MacKay High Yield Corporate Bond Fund (formerly, MainStay High Yield Corporate Bond Fund) (the Fund), one of the funds constituting The MainStay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years or periods in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians, transfer agent, and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
42 | MainStay MacKay High Yield Corporate Bond Fund |
Federal Income Tax Information
(Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders in a written statement as to the federal tax status of dividends paid by the Fund during such fiscal years.
For the fiscal year ended October 31, 2018, the Fund designated approximately $597,015 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2018 should be multiplied by 0.05% to arrive at the amount eligible for the corporate dividend-received deduction.
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
43 |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
44 | MainStay MacKay High Yield Corporate Bond Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
45 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
46 | MainStay MacKay High Yield Corporate Bond Fund |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
* | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
47 |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1717584 MS293-18 | MSHY11-12/18 (NYLIM) NL212 |
MainStay Money Market Fund
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support at any time. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors.
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B2 shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception Date | One Year | Five Years | Ten Years | Gross Expense Ratio3 | ||||||||||||||
Class A Shares4 | No Sales Charge | 1/3/1995 | 1.21 | % | 0.32 | % | 0.18 | % | 0.58 | % | ||||||||||
Investor Class Shares4 | No Sales Charge | 2/28/2008 | 0.98 | 0.24 | 0.14 | 0.77 | ||||||||||||||
Class B Shares2,4 | No Sales Charge | 5/1/1986 | 0.98 | 0.24 | 0.14 | 0.77 | ||||||||||||||
Class C Shares4 | No Sales Charge | 9/1/1998 | 0.98 | 0.24 | 0.14 | 0.77 | ||||||||||||||
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns would have been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
4. | As of October 31, 2018, MainStay Money Market Fund had an effective 7-day yield of 1.74% for Class A, 1.51% for Investor Class, 1.51% for Class B, and 1.51% for Class C shares. The 7-day current yield was 1.72% for Class A, and 1.50% for Investor Class, Class B and C shares. These yields reflect certain expense limitations. Had these expense limitations not been in effect, the effective 7-day yield would have been 1.74%, 1.51%, 1.51% and 1.51%, for Class A, Investor Class, Class B and C shares, respectively, and the 7-day current yield would have been 1.72%, 1.50%, 1.50% and 1.50%, for Class A, Investor Class, Class B and C shares, respectively. The current yield reflects the Fund’s earnings better than the Fund’s total return. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
Average Lipper Money Market Fund5 | 1.34 | % | 0.40 | % | 0.27 | % | ||||||
Morningstar Prime Money Market Category Average6 | 1.33 | 0.40 | 0.27 |
5. | The Average Lipper Money Market Fund is an equally weighted performance average adjusted for capital gains distributions and income dividends of all of the money market funds in the Lipper Universe. Lipper Inc., a wholly-owned subsidiary of Thomson Reuters, is an independent monitor of mutual fund performance. Results do not reflect any deduction of sales charges. Lipper averages are not class specific. Lipper returns are unaudited. Results are based on average total returns of similar funds with all dividend and capital gain distributions reinvested. |
6. | The Morningstar Prime Money Market Category Average is representative of funds that invest in short-term money market securities in order to provide a level of current income that is consistent with the preservation of capital. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay Money Market Fund |
Cost in Dollars of a $1,000 Investment in MainStay Money Market Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 10/31/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,007.40 | $ | 2.88 | $ | 1,022.33 | $ | 2.91 | 0.57% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,006.20 | $ | 4.05 | $ | 1,021.17 | $ | 4.08 | 0.80% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,006.20 | $ | 4.05 | $ | 1,021.17 | $ | 4.08 | 0.80% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,006.20 | $ | 4.05 | $ | 1,021.17 | $ | 4.08 | 0.80% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of October 31, 2018 (Unaudited)
See Portfolio of Investments beginning on page 10 for specific holdings within these categories. The Fund’s portfolio is subject to change.
8 | MainStay Money Market Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by NYL Investors LLC, the Fund’s Subadvisor.
How did MainStay Money Market Fund perform relative to its benchmark and peer group during the 12 months ended October 31, 2018?
As of October 31, 2018, Class A shares of MainStay Money Market Fund provided a 7-day effective yield of 1.74% and a 7-day current yield of 1.72%. For the 12 months ended October 31, 2018, Class A shares returned 1.21%, underperforming the 1.34% return of the Average Lipper Money Market Fund. Over the same period, Class A shares underperformed the 1.33% return of the Morningstar Prime Money Market Category Average.1
What factors affected the Fund’s performance during the reporting period?
Four Federal Reserve rate hikes during the reporting period helped boost all sectors of the Fund. Two of the largest factors that detracted from the Fund’s yield were our inability to find a suitable replacement for a maturing Toyota Motor Credit Corp. floating-rate bond and a reduction in our repurchase agreement balance with the Bank of Montreal.
What was the Fund’s duration2 strategy during the reporting period?
The Fund’s strategy was to shorten duration somewhat. We believe that this strategy could reverse to a certain degree going forward as we continue to search for suitable floating-rate corporate bonds to pare down the Fund’s allocation to the U.S. Treasury sector. The Fund’s duration decreased from 36 days to 20 days during the 12-month reporting period.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, the investment-grade sector provided the strongest positive contribution to the Fund’s relative performance. (Contributions take weightings and total returns into account.) Over the same period, U.S. Treasury bills were the weakest performers.
What were some of the Fund’s largest purchases and sales during the reporting period?
On a yield-enhancement basis, the largest purchase during the reporting period was an allocation to the Federal Home Loan Bank. This helped offset the increased percentage of U.S. Treasury bills that the Fund held on October 31, 2018. Because of the short-term nature of the Fund’s assets, the Fund did not sell any of its securities during the reporting period.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund’s holdings among repurchase agreements decreased while holdings among U.S. Treasury securities increased. This was largely the result of decisions by the Bank of Montreal as its fiscal year-end approached. The Fund also added an allocation to the agency sector to help enhance the Fund’s yield.
1. | See page 5 for other share class returns, which may be higher or lower than Class A share returns. See page 6 for more information on benchmark and peer group returns. |
2. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of days or years and is considered a more accurate sensitivity gauge than average maturity. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
9 |
Portfolio of Investments October 31, 2018
Principal Amount | Value | |||||||
Short-Term Investments 100.1%† |
| |||||||
Certificates of Deposit 2.8% |
| |||||||
Canadian Imperial Bank of Commerce | $ | 4,000,000 | $ | 4,000,000 | ||||
Royal Bank of Canada | 5,000,000 | 5,000,000 | ||||||
|
| |||||||
Total Certificates of Deposit | 9,000,000 | |||||||
|
| |||||||
Financial Company Commercial Paper 13.9% |
| |||||||
GlaxoSmithKline Finance PLC | 5,000,000 | 4,995,793 | ||||||
JP Morgan Securities LLC | 5,000,000 | 4,996,167 | ||||||
Massachusetts Mutual Life Insurance Co. (b)(c) |
| |||||||
2.222%, due 11/8/18 | 5,000,000 | 4,997,812 | ||||||
2.252%, due 11/21/18 | 5,000,000 | 4,993,611 | ||||||
National Rural Utilities Cooperative Finance Corp. (c) | ||||||||
2.26%, due 11/15/18 | 5,000,000 | 4,995,644 | ||||||
2.284%, due 11/27/18 | 5,000,000 | 4,991,803 | ||||||
Nationwide Life Insurance Co. (b)(c) | ||||||||
2.268%, due 11/19/18 | 5,000,000 | 4,994,350 | ||||||
2.282%, due 11/26/18 | 5,000,000 | 4,992,118 | ||||||
Toronto-Dominion Bank | 5,000,000 | 5,000,000 | ||||||
|
| |||||||
Total Financial Company Commercial Paper | 44,957,298 | |||||||
|
| |||||||
Other Commercial Paper 54.2% |
| |||||||
Apple, Inc. (b)(c) | ||||||||
2.195%, due 11/1/18 | 5,000,000 | 5,000,000 | ||||||
2.21%, due 11/7/18 | 5,000,000 | 4,998,175 | ||||||
Archer-Daniels-Midland Co. (b)(c) | ||||||||
2.26%, due 11/20/18 | 5,000,000 | 4,994,062 | ||||||
2.276%, due 11/28/18 | 5,000,000 | 4,991,450 | ||||||
Army and Air Force Exchange Service (b)(c) | ||||||||
2.215%, due 11/9/18 | 5,000,000 | 4,997,533 | ||||||
2.256%, due 11/28/18 | 5,000,000 | 4,991,637 | ||||||
BASF SE (b)(c) | ||||||||
2.215%, due 11/1/18 | 5,000,000 | 5,000,000 | ||||||
2.228%, due 11/6/18 | 5,000,000 | 4,998,424 | ||||||
Canadian National Railway Co. (b)(c) | ||||||||
2.26%, due 11/15/18 | 5,000,000 | 4,995,606 | ||||||
2.312%, due 12/4/18 | 5,000,000 | 4,989,550 | ||||||
Caterpillar Financial Services Corp. | 5,000,000 | 4,991,910 | ||||||
Chevron Corp. | 5,000,000 | 4,998,493 |
Principal Amount | Value | |||||||
Other Commercial Paper (continued) |
| |||||||
Cummins, Inc. | $ | 5,000,000 | $ | 4,995,883 | ||||
Emerson Electric Co. | 5,000,000 | 4,995,312 | ||||||
Exxon Mobil Corp. | 5,000,000 | 4,996,333 | ||||||
General Dynamics Corp. (b)(c) | ||||||||
2.255%, due 11/13/18 | 5,000,000 | 4,996,300 | ||||||
2.27%, due 11/20/18 | 5,000,000 | 4,993,983 | ||||||
Home Depot, Inc. | 5,000,000 | 4,997,578 | ||||||
IBM Credit LLC (b)(c) | ||||||||
2.26%, due 11/20/18 | 5,000,000 | 4,994,036 | ||||||
2.313%, due 12/14/18 | 5,000,000 | 4,986,264 | ||||||
John Deere Canada ULC (b)(c) | ||||||||
2.218%, due 11/2/18 | 5,000,000 | 4,999,692 | ||||||
2.225%, due 11/5/18 | 5,000,000 | 4,998,767 | ||||||
Novartis Finance Corp. | 5,000,000 | 4,991,839 | ||||||
PACCAR Financial Corp. | 5,000,000 | 4,998,150 | ||||||
Praxair, Inc. (c) | ||||||||
2.214%, due 11/2/18 | 5,000,000 | 4,999,699 | ||||||
2.221%, due 11/8/18 | 5,000,000 | 4,997,871 | ||||||
Roche Holdings, Inc. (b)(c) | ||||||||
2.208%, due 11/6/18 | 5,000,000 | 4,998,479 | ||||||
2.238%, due 11/19/18 | 5,000,000 | 4,994,400 | ||||||
Schlumberger Investment SA (b)(c) | ||||||||
2.195%, due 11/2/18 | 5,000,000 | 4,999,690 | ||||||
2.21%, due 11/5/18 | 5,000,000 | 4,998,761 | ||||||
Siemens Capital Co., LLC (b)(c) | ||||||||
2.308%, due 12/12/18 | 5,000,000 | 4,987,074 | ||||||
2.309%, due 12/12/18 | 5,000,000 | 4,987,074 | ||||||
Total Capital Canada Ltd. | 5,000,000 | 5,000,000 | ||||||
Toyota Motor Credit Corp. | 5,000,000 | 4,986,875 | ||||||
Unilever Capital Corp. | 5,000,000 | 4,987,074 | ||||||
|
| |||||||
Total Other Commercial Paper | 174,827,974 | |||||||
|
| |||||||
Treasury Debt 10.1% |
| |||||||
United States Treasury Bills (c) | ||||||||
(zero coupon), due 11/1/18 | 4,213,000 | 4,213,000 | ||||||
2.206%, due 12/11/18 | 20,242,000 | 20,193,194 | ||||||
2.207%, due 12/11/18 | 2,086,000 | 2,080,971 | ||||||
United States Treasury Notes | ||||||||
1.125%, due 5/31/19 | 3,000,000 | 2,979,718 | ||||||
1.25%, due 4/30/19 | 3,000,000 | 2,984,717 | ||||||
|
| |||||||
Total Treasury Debt | 32,451,600 | |||||||
|
|
10 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Short-Term Investments (continued) |
| |||||||
Treasury Repurchase Agreements 16.8% |
| |||||||
Bank of America N.A. | $ | 15,000,000 | $ | 15,000,000 | ||||
RBC Capital Markets LLC | 24,386,000 | 24,386,000 | ||||||
TD Securities (U.S.A.) LLC | 15,000,000 | 15,000,000 | ||||||
|
| |||||||
Total Treasury Repurchase Agreements | 54,386,000 | |||||||
|
|
Principal Amount | Value | |||||||
U.S. Government Agency Debt 2.3% |
| |||||||
Federal Home Loan Bank | $ | 5,230,000 | $ | 5,225,249 | ||||
Tennessee Valley Authority | 2,200,000 | 2,198,398 | ||||||
|
| |||||||
Total U.S. Government Agency Debt | 7,423,647 | |||||||
|
| |||||||
Total Short-Term Investments (Amortized Cost $323,046,519) | 100.1 | % | 323,046,519 | |||||
Other Assets, Less Liabilities | (0.1 | ) | (376,742 | ) | ||||
Net Assets | 100.0 | % | $ | 322,669,777 |
† | Percentages indicated are based on Fund net assets. |
(a) | Floating rate—Rate shown was the rate in effect as of October 31, 2018. |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(c) | Interest rate shown represents yield to maturity. |
The following abbreviation is used in the preceding pages:
LIBOR—London | Interbank Offered Rate |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets:
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Short-Term Investments | ||||||||||||||||
Certificates of Deposit | $ | — | $ | 9,000,000 | $ | — | $ | 9,000,000 | ||||||||
Financial Company Commercial Paper | — | 44,957,298 | — | 44,957,298 | ||||||||||||
Other Commercial Paper | — | 174,827,974 | — | 174,827,974 | ||||||||||||
Treasury Debt | — | 32,451,600 | — | 32,451,600 | ||||||||||||
Treasury Repurchase Agreements | — | 54,386,000 | — | 54,386,000 | ||||||||||||
U.S. Government Agency Debt | — | 7,423,647 | — | 7,423,647 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | — | $ | 323,046,519 | $ | — | $ | 323,046,519 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Statement of Assets and Liabilities as of October 31, 2018
Assets | ||||
Investment in securities, at value | $ | 268,660,519 | ||
Repurchase agreements, at value | 54,386,000 | |||
Cash | 953 | |||
Receivables: | ||||
Fund shares sold | 1,631,416 | |||
Interest | 52,706 | |||
Other assets | 40,371 | |||
|
| |||
Total assets | 324,771,965 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 1,846,451 | |||
Manager (See Note 3) | 110,021 | |||
Transfer agent (See Note 3) | 91,192 | |||
Custodian | 17,693 | |||
Shareholder communication | 17,143 | |||
Professional fees | 6,738 | |||
Trustees | 777 | |||
Accrued expenses | 6,320 | |||
Dividend payable | 5,853 | |||
|
| |||
Total liabilities | 2,102,188 | |||
|
| |||
Net assets | $ | 322,669,777 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 3,227,209 | ||
Additional paid-in capital | 319,442,783 | |||
|
| |||
322,669,992 | ||||
Total distributable earnings (loss) | (215 | ) | ||
|
| |||
Net assets | $ | 322,669,777 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 235,854,505 | ||
|
| |||
Shares of beneficial interest outstanding | 235,885,172 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 26,548,298 | ||
|
| |||
Shares of beneficial interest outstanding | 26,560,275 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 37,283,937 | ||
|
| |||
Shares of beneficial interest outstanding | 37,289,783 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 22,983,037 | ||
|
| |||
Shares of beneficial interest outstanding | 22,985,665 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 1.00 | ||
|
|
12 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 5,704,214 | ||
Other | 1,116 | |||
|
| |||
Total income | 5,705,330 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 1,291,567 | |||
Transfer agent (See Note 3) | 537,120 | |||
Registration | 100,686 | |||
Professional fees | 73,153 | |||
Shareholder communication | 36,732 | |||
Custodian | 33,951 | |||
Trustees | 7,159 | |||
Miscellaneous | 14,025 | |||
|
| |||
Total expenses before waiver/reimbursement | 2,094,393 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (39,405 | ) | ||
|
| |||
Net expenses | 2,054,988 | |||
|
| |||
Net investment income (loss) | 3,650,342 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments |
| |||
Net realized gain (loss) on investments | (8 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 3,650,334 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 3,650,342 | $ | 935,421 | ||||
Net realized gain (loss) on investments | (8 | ) | 50 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 3,650,334 | 935,471 | ||||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (2,760,996 | ) | ||||||
Investor Class | (256,309 | ) | ||||||
Class B | (385,826 | ) | ||||||
Class C | (247,211 | ) | ||||||
|
| |||||||
(3,650,342 | ) | |||||||
|
| |||||||
Dividends to shareholders from net investment income: | ||||||||
Class A | (726,645 | ) | ||||||
Investor Class | (102,568 | ) | ||||||
Class B | (89,200 | ) | ||||||
Class C | (69,767 | ) | ||||||
|
| |||||||
(988,180 | ) | |||||||
|
| |||||||
Total dividends and distributions to shareholders | (3,650,342 | ) | (988,180 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 333,214,701 | 311,082,298 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 3,557,971 | 902,460 | ||||||
Cost of shares redeemed | (342,943,592 | ) | (362,582,051 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (6,170,920 | ) | (50,597,293 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (6,170,928 | ) | (50,650,002 | ) | ||||
Net Assets | ||||||||
Beginning of year | 328,840,705 | 379,490,707 | ||||||
|
| |||||||
End of year(2) | $ | 322,669,777 | $ | 328,840,705 | ||||
|
|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $(74) in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
14 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
Net realized and unrealized gain (loss) on investments | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.01 | ) | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 1.21 | % | 0.35 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.20 | % | 0.32 | % | 0.02 | % | 0.01 | % | 0.01 | % | ||||||||||
Net expenses | 0.57 | % | 0.59 | % | 0.43 | % | 0.13 | % | 0.11 | % | ||||||||||
Expenses (before waiver/reimbursement) | 0.57 | % | 0.60 | % | 0.64 | % | 0.64 | % | 0.64 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 235,855 | $ | 227,572 | $ | 226,181 | $ | 243,517 | $ | 230,330 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
Net realized and unrealized gain (loss) on investments | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.01 | ) | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
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|
|
|
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|
|
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|
| |||||||||||
Total investment return (b) | 0.98 | % | 0.20 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.97 | % | 0.18 | % | 0.02 | % | 0.01 | % | 0.01 | % | ||||||||||
Net expenses | 0.80 | % | 0.73 | % | 0.43 | % | 0.14 | % | 0.11 | % | ||||||||||
Expenses (before waiver/reimbursement) | 0.84 | % | 0.79 | % | 0.83 | % | 0.87 | % | 0.89 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 26,548 | $ | 27,087 | $ | 58,658 | $ | 56,512 | $ | 56,177 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
Net realized and unrealized gain (loss) on investments | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.01 | ) | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 0.98 | % | 0.20 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.96 | % | 0.17 | % | 0.02 | % | 0.01 | % | 0.01 | % | ||||||||||
Net expenses | 0.80 | % | 0.73 | % | 0.43 | % | 0.14 | % | 0.11 | % | ||||||||||
Expenses (before waiver/reimbursement) | 0.84 | % | 0.79 | % | 0.83 | % | 0.87 | % | 0.89 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 37,284 | $ | 43,351 | $ | 53,341 | $ | 58,152 | $ | 63,581 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
Net realized and unrealized gain (loss) on investments | (0.00 | )‡ | 0.00 | ‡ | 0.00 | ‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.01 | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | 0.00 | ‡ | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.01 | ) | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | (0.00 | )‡ | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 0.98 | % | 0.20 | % | 0.01 | % | 0.01 | % | 0.01 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.94 | % | 0.17 | % | 0.02 | % | 0.01 | % | 0.01 | % | ||||||||||
Net expenses | 0.80 | % | 0.73 | % | 0.43 | % | 0.13 | % | 0.11 | % | ||||||||||
Expenses (before waiver/reimbursement) | 0.84 | % | 0.79 | % | 0.83 | % | 0.87 | % | 0.89 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 22,983 | $ | 30,831 | $ | 41,311 | $ | 41,050 | $ | 36,939 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
16 | MainStay Money Market Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay Money Market Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has five classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Investor Class shares commenced operations on February 28, 2008. Class T shares were registered for sale effective as of February 28, 2017. As of October 31, 2018, Class T shares were not yet offered for sale.
Class A, Class I and Investor Class shares are offered at net asset value (“NAV”) without an initial sales charge. Class T shares are currently expected to be offered at NAV without an initial sales charge. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Investor Class shares may convert automatically to Class A shares and Class A shares may convert automatically to Investor Class shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions.
The Fund’s investment objective is to seek a high level of current income while preserving capital and maintaining liquidity.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted
accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Valuation of Shares. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share by using the amortized cost method of valuation, it cannot guarantee it will do so. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
(B) Securities Valuation. Securities are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate per the requirements of Rule 2a-7 under the 1940 Act. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security.
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
17 |
Notes to Financial Statements (continued)
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
Securities valued at amortized cost are not obtained from a quoted price in an active market and are generally categorized as Level 2 in the hierarchy. The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund may utilize some of the following fair value
techniques: multi-dimensional relational pricing models and option adjusted spread pricing. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, there were no securities held by the Fund that were fair valued in such a manner.
(C) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare dividends from net investment income, if any, daily and intends to pay them at least monthly and declares and pays distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Income from payment-in-kind securities, to the extent the Fund held any such securities during the year ended October 31, 2018, is recorded daily based on the effective interest method of accrual.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by
18 | MainStay Money Market Fund |
the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund.
(I) Debt Securities. The Fund’s investments may include securities such as variable rate notes, floaters and mortgage-related and asset-backed securities. If expectations about changes in interest rates, or assessments of an issuer’s credit worthiness or market conditions are incorrect, these types of investments could lose money.
The Fund may also invest in U.S. dollar-denominated securities of foreign issuers, which carry certain risks in addition to the usual risks inherent in domestic instruments. These risks include those resulting from future adverse political or economic developments and possible imposition of foreign governmental laws or restrictions. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
(J) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification
obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. NYL Investors LLC (“NYL Investors” or the “Subadvisor”), a registered investment adviser and a direct, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and NYL Investors, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.40% up to $500 million; 0.35% from $500 million to $1 billion; and 0.30% in excess of $1 billion. During the year ended October 31, 2018, the effective management fee rate was 0.40% of the Fund’s average daily net assets, exclusive of any applicable waivers/reimbursements.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) do not exceed the following percentages of the Fund’s average daily net assets: Class A, 0.70%; Investor Class, 0.80%; Class B, 0.80%; and Class C, 0.80%. New York Life Investments will apply an equivalent waiver or reimbursement, in an equal number of basis points of the Class A shares waiver/reimbursement to Class T shares. This agreement will remain in effect until February 28, 2019, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
New York Life Investments may voluntarily waive or reimburse expenses of the Fund to the extent it deems appropriate to enhance the yield of the Fund’s during periods when expenses have a significant impact on the yield of the Fund, as applicable, because of low interest rates. This expense limitation policy is voluntary and in addition to any contractual arrangements that may be in place with respect to the Fund and described in the Fund’s prospectus.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $1,291,567. Additionally,
19 |
Notes to Financial Statements (continued)
New York Life Investments reimbursed expenses in the amount of $39,405, without which the Fund’s total returns would have been lower.
State Street Bank and Trust Company (“State Street”) provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAV of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAV, and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
(B) Sales Charges. Although the Fund does not assess a CDSC upon redemption of Class B or Class C shares of the Fund, the applicable CDSC will be assessed when shares are redeemed from the Fund if the shareholder previously exchanged his or her investment into the Fund from another fund within the MainStay Group of Funds. During the year ended October 31, 2018, the Fund was advised that NYLIFE Distributors LLC (the “Distributor”), an indirect wholly owned subsidiary of New York Life, received from shareholders the proceeds from CDSCs of Class A, Investor Class, Class B and Class C of $27,445, $179, $47,481 and $16,452, respectively.
(C) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 203,091 | ||
Investor Class | 94,595 | |||
Class B | 144,654 | |||
Class C | 94,780 |
(D) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
Note 4–Federal Income Tax
The amortized cost also represents the aggregate cost for federal income tax purposes.
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary Income | Accumulated Capital and Other Gain (Loss) | Other Temporary Differences | Unrealized Appreciation (Depreciation) | Total Accumulated Gain (Loss) | ||||
$5,779 | $(141) | $(5,853) | $— | $(215) |
The other temporary differences are primarily due to dividends payable.
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards of $141 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||
Unlimited | $—(a) | $— |
(a) | Less than 1,000. |
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 3,650,342 | $ | 988,180 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
20 | MainStay Money Market Fund |
Note 6–Capital Share Transactions
Class A (at $1 per share) | Shares | |||
Year ended October 31, 2018: | ||||
Shares sold | 284,906,430 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,687,453 | |||
Shares redeemed | (286,642,779 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 951,104 | |||
Shares converted into Class A (See Note 1) | 10,972,124 | |||
Shares converted from Class A (See Note 1) | (3,641,126 | ) | ||
|
| |||
Net increase (decrease) | 8,282,102 | |||
|
| |||
Year ended October 31, 2017: | ||||
Shares sold | 230,832,054 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 673,838 | |||
Shares redeemed | (267,898,343 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (36,392,451 | ) | ||
Shares converted into Class A (See Note 1) | 41,236,776 | |||
Shares converted from Class A (See Note 1) | (3,420,770 | ) | ||
|
| |||
Net increase (decrease) | 1,423,555 | |||
|
| |||
Investor Class (at $1 per share) | Shares | |||
Year ended October 31, 2018: | ||||
Shares sold | 27,361,559 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 247,655 | |||
Shares redeemed | (20,939,279 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 6,669,935 | |||
Shares converted into Investor Class (See Note 1) | 3,717,379 | |||
Shares converted from Investor Class (See Note 1) | (10,925,800 | ) | ||
|
| |||
Net increase (decrease) | (538,486 | ) | ||
|
| |||
Year ended October 31, 2017: | ||||
Shares sold | 40,171,786 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 86,374 | |||
Shares redeemed | (34,648,952 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | 5,609,208 | |||
Shares converted into Investor Class (See Note 1) | 3,639,222 | |||
Shares converted from Investor Class (See Note 1) | (40,811,279 | ) | ||
|
| |||
Net increase (decrease) | (31,562,849 | ) | ||
|
| |||
Class B (at $1 per share) | Shares | |||
Year ended October 31, 2018: | ||||
Shares sold | 3,017,330 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 380,517 | |||
Shares redeemed | (9,387,697 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (5,989,850 | ) | ||
Shares converted into Class B (See Note 1) | 34 | |||
Shares converted from Class B (See Note 1) | (77,057 | ) | ||
|
| |||
Net increase (decrease) | (6,066,873 | ) | ||
|
| |||
Year ended October 31, 2017: | ||||
Shares sold | 6,687,777 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 80,358 | |||
Shares redeemed | (16,508,386 | ) | ||
Net increase (decrease) in shares outstanding before conversion | (9,740,251 | ) | ||
Shares converted from Class B (See Note 1) | (242,742 | ) | ||
|
| |||
Net increase (decrease) | (9,982,993 | ) | ||
|
| |||
Class C (at $1 per share) | Shares | |||
Year ended October 31, 2018: | ||||
Shares sold | 17,929,357 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 242,346 | |||
Shares redeemed | (25,973,838 | ) | ||
|
| |||
Net increase (decrease) in shares outstanding before conversion | (7,802,135 | ) | ||
Shares converted from Class C (See Note 1) | (45,554 | ) | ||
|
| |||
Net increase (decrease) | (7,847,689 | ) | ||
|
| |||
Year ended October 31, 2017: | ||||
Shares sold | 33,390,681 | |||
Shares issued to shareholders in reinvestment of dividends and distributions | 61,890 | |||
Shares redeemed | (43,526,370 | ) | ||
Net increase (decrease) in shares outstanding before conversion | (10,073,799 | ) | ||
Shares converted into Class C (See Note 1) | 13,726 | |||
Shares converted from Class C (See Note 1) | (414,933 | ) | ||
|
| |||
Net increase (decrease) | (10,475,006 | ) | ||
|
|
Note 7–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
21 |
Notes to Financial Statements (continued)
Note 8–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
22 | MainStay Money Market Fund |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The Mainstay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Mainstay Money Market Fund (the Fund), one of the funds constituting The Mainstay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
23 |
Federal Income Tax Information
(Unaudited)
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nyinvestments.com/funds or on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nyinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
24 | MainStay Money Market Fund |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
25 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
26 | MainStay Money Market Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
27 |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
* | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
28 | MainStay Money Market Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1715987 MS293-18 | MSMM11-12/18 (NYLIM) NL214 |
MainStay MacKay Tax Free Bond Fund (Formerly known as MainStay Tax Free Bond Fund)
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception Date | One Year | Five Years | Ten Years or Since | Gross Expense Ratio3 | ||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 1/3/1995 | | | –3.60 0.94 | %
| | 3.49 4.44 | %
| | 4.96 5.45 | %
| | 0.81 0.81 | %
| |||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | –3.58 0.97 |
| | 3.46 4.42 |
| | 4.91 5.40 |
| | 0.79 0.79 |
| |||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 5/1/1986 | | | –4.09 0.81 |
| | 3.84 4.18 |
| | 5.14 5.14 |
| | 1.04 1.04 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 9/1/1998 | | | –0.27 0.71 |
| | 4.16 4.16 |
| | 5.13 5.13 |
| | 1.04 1.04 |
| |||||||
Class I Shares | No Sales Charge | 12/21/2009 | 1.19 | 4.68 | 4.97 | 0.56 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
Bloomberg Barclays Municipal Bond Index4 | –0.51 | % | 3.25 | % | 4.80 | % | ||||||
Morningstar Muni National Long Category Average5 | –0.88 | 3.52 | 4.94 |
4. | The Bloomberg Barclays Municipal Bond Index is the Fund’s primary broad-based securities market index for comparison purposes. The Bloomberg Barclays Municipal Bond Index is considered representative of the broad-based market for investment-grade, tax-exempt bonds with a maturity of at least one year. Bonds subject to the alternative minimum tax or with floating or zero coupons are excluded. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Morningstar Muni National Long Category Average is representative of funds that invest in bonds issued by various state and local governments to fund public projects. The income from these bonds is generally free from federal taxes. These portfolios have durations of more than 7.0 years. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Tax Free Bond Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Tax Free Bond Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 10/31/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,008.70 | $ | 4.05 | $ | 1,021.17 | $ | 4.08 | 0.80% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,008.80 | $ | 3.95 | $ | 1,021.27 | $ | 3.97 | 0.78% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,007.50 | $ | 5.21 | $ | 1,020.01 | $ | 5.24 | 1.03% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,007.50 | $ | 5.21 | $ | 1,020.01 | $ | 5.24 | 1.03% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,010.00 | $ | 2.74 | $ | 1,022.48 | $ | 2.75 | 0.54% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of October 31, 2018 (Unaudited)
New York | 15.6 | % | ||
California | 14.6 | |||
Illinois | 11.5 | |||
Puerto Rico | 7.7 | |||
New Jersey | 4.8 | |||
South Carolina | 4.8 | |||
Texas | 4.8 | |||
Michigan | 3.1 | |||
Connecticut | 2.8 | |||
Nebraska | 2.2 | |||
U.S. Virgin Islands | 2.1 | |||
Colorado | 2.0 | |||
Pennsylvania | 1.9 | |||
Arkansas | 1.6 | |||
Guam | 1.4 | |||
Virginia | 1.4 | |||
Florida | 1.3 | |||
Oklahoma | 1.0 | |||
Montana | 1.0 | |||
District of Columbia | 0.9 | |||
Maryland | 0.9 | |||
Missouri | 0.9 | |||
Rhode Island | 0.9 | |||
Arizona | 0.8 | |||
Georgia | 0.8 | |||
Alabama | 0.7 |
Massachusetts | 0.7 | % | ||
Ohio | 0.7 | |||
Kansas | 0.6 | |||
Louisiana | 0.6 | |||
Tennessee | 0.6 | |||
Washington | 0.6 | |||
Indiana | 0.5 | |||
Wisconsin | 0.5 | |||
Iowa | 0.4 | |||
Oregon | 0.4 | |||
North Dakota | 0.3 | |||
Utah | 0.3 | |||
New Hampshire | 0.2 | |||
New Mexico | 0.2 | |||
Wyoming | 0.2 | |||
Alaska | 0.1 | |||
Hawaii | 0.1 | |||
Kentucky | 0.1 | |||
Mississippi | 0.1 | |||
South Dakota | 0.1 | |||
Minnesota | 0.0 | ‡ | ||
North Carolina | 0.0 | ‡ | ||
Other Assets, Less Liabilities | 1.2 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 11 for specific holdings within these categories. The Fund’s portfolio is subject to change.
‡ | Less than one-tenth of a percent. |
Top Ten Issuers Held as of October 31, 2018 (Unaudited)
1. | New York State Dormitory Authority, Sales Tax, Revenue Bonds, 5.00%, due 3/15/34–3/15/44 |
2. | Puerto Rico Highway & Transportation Authority, Revenue Bonds, 5.25%–5.50%, due 7/1/21–7/1/41 |
3. | South Carolina Public Service Authority, Revenue Bonds, 5.00%, due 12/1/29–12/1/56 |
4. | New York City Transitional Finance Authority, Future Tax Secured, Revenue Bonds, 5.00%, due 5/1/32–5/1/42 |
5. | Central Plains Energy, Project No. 3, Revenue Bonds, 5.00%–5.25%, due 9/1/32–9/1/42 |
6. | Commonwealth of Puerto Rico, Public Improvement, Unlimited General Obligation, (zero coupon)-6.00%, due 7/1/19–7/1/37 |
7. | City of Chicago IL, Wastewater Transmission, Revenue Bonds, 5.00%–5.25%, due 1/1/28–1/1/47 |
8. | Virgin Islands Public Finance Authority, Revenue Bonds, 5.00%, due 9/1/30–10/1/39 |
9. | North Texas Tollway Authority, Revenue Bonds, 5.00%, due 1/1/34–1/1/40 |
10. | State of California, Unlimited General Obligation, 5.00%–6.25%, due 11/1/34–10/1/39 |
8 | MainStay MacKay Tax Free Bond Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers John Loffredo, CFA, Robert DiMella, CFA, Michael Petty, David Dowden, Scott Sprauer and Frances Lewis of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Tax Free Bond Fund perform relative to its benchmark and peer group during the 12 months ended October 31, 2018?
For the 12 months ended October 31, 2018, Class I shares of MainStay MacKay Tax Free Bond Fund returned 1.19%, outperforming the –0.51% return of the Fund’s primary benchmark, the Bloomberg Barclays Municipal Bond Index. Over the same period, Class I shares also outperformed the –0.88% return of the Morningstar Muni National Long Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
Security selection, specifically exposure to Puerto Rico and Virgin Islands issued debt, made a positive contribution to the Fund’s performance relative to the Bloomberg Barclays Municipal Bond Index during the period. (Contributions take weightings and total returns into account.) The Fund’s barbell yield curve2 strategy further enhanced performance as the municipal yield curve continued to flatten in line with the U.S. Treasury yield curve. Lastly, the Fund’s underweight exposure to high-grade, state general obligation credits contributed positively to performance, as this sector underperformed the general municipal market.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
The use of derivatives, specifically U.S. Treasury futures, allowed the Fund to manage its effective duration3 and maximize an attractive tax-exempt income stream for our shareholders.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay Tax Free Bond Fund was renamed MainStay MacKay Tax Free Bond Fund. For more information on this change, please refer to the supplement dated December 15, 2017.
What was the Fund’s duration strategy during the reporting period?
The Fund maintained a slightly defensive duration profile versus the Bloomberg Barclays Municipal Bond Index during the period. As of October 31, 2018, the Fund’s duration was 4.89 years compared to a benchmark duration of 5.39 years.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
Relative to the Bloomberg Barclays Municipal Bond Index, underweight exposure to state general obligation and pre-refunded issued bonds, along with an overweight exposure to special tax bonds, made the strongest contributions to the Fund’s performance during the period. Overweight exposure in lease-backed bonds were the largest detractors during the period.
What were some of the Fund’s largest purchases and sales during the reporting period?
Some of the Fund’s largest purchases during the reporting period were in intermediate- to long-term maturity bonds featuring attractive spreads.4 Specifically, two of the largest purchases were in South Carolina Patriots Energy five-year mandatory put bonds and New York Dormitory Authority sales tax revenue bonds, both strong AA-rated credits.5 We believed that, as credit spreads compressed during the period, it made sense to increase the credit quality of the overall portfolio, where possible. Two of the largest sales executed during the period were short-maturity bonds to meet redemptions near the end of the reporting period.
How did the Fund’s sector weightings change during the reporting period?
The Fund’s two largest decreases in sector exposure during the reporting period were in the hospital and pre-refunded sectors. The housing and water/sewer sectors saw the two largest increases.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
2. | The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting. |
3. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
4. | The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time. |
5. | An obligation rated ‘AA’ by S&P is deemed by S&P to differ from the highest-rated obligations only to a small degree. In the opinion of S&P, the obligor’s capacity to meet its financial commitment on the obligation is very strong. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
9 |
How was the Fund positioned at the end of the reporting period?
As of October 31, 2018, the Fund held overweight positions in the special tax, local general obligation and leasing sectors relative to the Bloomberg Barclays Municipal Bond Index. In terms of credit quality, the Fund was overweight in AA-rated securities. As of the same date, the Fund held benchmark-relative underweight exposure to the state general obligation, pre-refunded and hospital sectors, as well as AAA- and A-rated securities.6 The Fund also maintained a slightly defensive duration posture.
6. | An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s (“S&P”), and in the opinion of S&P, the obligor’s capacity to meet its financial commitment on the obligation is extremely strong. An obligation rated ‘A’ by S&P is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. In the opinion of S&P, however, the obligor’s capacity to meet its financial commitment on the obligation is still strong. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay MacKay Tax Free Bond Fund |
Portfolio of Investments October 31, 2018
Principal Amount | Value | |||||||
Municipal Bonds 98.8%† |
| |||||||
Alabama 0.7% |
| |||||||
City of Birmingham AL, Unlimited General Obligation | $ | 4,150,000 | $ | 4,460,088 | ||||
Houston County Health Care Authority, Southeast Alabama Medical, Revenue Bonds | ||||||||
5.00%, due 10/1/25 | 1,000,000 | 1,093,950 | ||||||
5.00%, due 10/1/30 | 3,700,000 | 3,942,572 | ||||||
University of South Alabama, Revenue Bonds | ||||||||
Insured: AGM | 2,000,000 | 2,034,280 | ||||||
Insured: AGM | 1,110,000 | 1,255,010 | ||||||
Insured: AGM | 2,000,000 | 2,249,240 | ||||||
Water Works Board of the City of Birmingham, Revenue Bonds | 6,140,000 | 6,914,193 | ||||||
|
| |||||||
21,949,333 | ||||||||
|
| |||||||
Alaska 0.1% |
| |||||||
Alaska Industrial Development & Export Authority, FairBanks Community Hospital, Revenue Bonds | 3,550,000 | 3,764,456 | ||||||
|
| |||||||
Arizona 0.8% |
| |||||||
Arizona Health Facilities Authority, Phoenix Children’s Hospital, Revenue Bonds | 1,000,000 | 1,046,550 | ||||||
Salt River Project Agricultural Improvement & Power District, Electric System, Revenue Bonds | ||||||||
Series A | 10,000,000 | 11,300,700 | ||||||
Series A | 10,000,000 | 11,275,500 | ||||||
|
| |||||||
23,622,750 | ||||||||
|
| |||||||
Arkansas 1.6% |
| |||||||
City of Fort Smith AR, Water & Sewer, Revenue Bonds | ||||||||
Insured: BAM | 1,945,000 | 2,221,598 | ||||||
Insured: BAM | 1,535,000 | 1,744,021 |
Principal Amount | Value | |||||||
Arkansas (continued) |
| |||||||
City of Fort Smith AR, Water & Sewer, Revenue Bonds (continued) | ||||||||
Insured: BAM | $ | 1,075,000 | $ | 1,214,922 | ||||
Insured: BAM | 2,335,000 | 2,618,072 | ||||||
County of Pulaski AR, Arkansas Children’s Hospital, Revenue Bonds | 2,000,000 | 2,206,720 | ||||||
Pulaski County Special School District, Limited General Obligation | 15,500,000 | 15,419,710 | ||||||
Springdale Public Facilities Board, Arkansas Children’s Northwest, Revenue Bonds | 2,890,000 | 3,205,415 | ||||||
Springdale School District No. 50, Limited General Obligation | ||||||||
4.00%, due 6/1/36 | 2,500,000 | 2,535,775 | ||||||
4.00%, due 6/1/40 | 11,000,000 | 10,999,670 | ||||||
University of Arkansas, UALR Campus, Revenue Bonds | ||||||||
5.00%, due 10/1/29 | 1,315,000 | 1,503,992 | ||||||
5.00%, due 10/1/30 | 1,110,000 | 1,263,657 | ||||||
5.00%, due 10/1/31 | 1,205,000 | 1,367,265 | ||||||
|
| |||||||
46,300,817 | ||||||||
|
| |||||||
California 14.6% |
| |||||||
Anaheim City School District, Election 2016, Unlimited General Obligation | 18,200,000 | 18,454,254 | ||||||
Anaheim Public Financing Authority, Public Improvements Project, Revenue Bonds | ||||||||
Series C, Insured: AGM | 11,990,000 | 7,213,184 | ||||||
Series A-1, Insured: NATL-RE | 15,675,000 | 15,704,155 | ||||||
Antelope Valley Community College District, Election 2016, Unlimited General Obligation | 15,000,000 | 15,988,200 | ||||||
California Educational Facilities Authority, Loma Linda University, Revenue Bonds | 390,000 | 426,949 | ||||||
California Educational Facilities Authority, Prerefunded—University of San Francisco, Revenue Bonds | 745,000 | 831,331 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
California (continued) |
| |||||||
California Educational Facilities Authority, Unrefunded—University of San Francisco, Revenue Bonds | $ | 780,000 | $ | 866,869 | ||||
California Health Facilities Financing Authority, Dignity Health, Revenue Bonds | 3,000,000 | 3,085,320 | ||||||
California Health Facilities Financing Authority, Providence St. Joseph Health, Revenue Bonds | 1,230,000 | 1,253,395 | ||||||
California Health Facilities Financing Authority, Sutter Health, Revenue Bonds | 5,000,000 | 5,451,100 | ||||||
California Municipal Finance Authority, Southern California Institute of Architecture Project, Revenue Bonds | ||||||||
5.00%, due 12/1/22 | 390,000 | 427,752 | ||||||
5.00%, due 12/1/23 | 405,000 | 450,769 | ||||||
5.00%, due 12/1/24 | 425,000 | 478,707 | ||||||
5.00%, due 12/1/25 | 450,000 | 511,322 | ||||||
5.00%, due 12/1/26 | 470,000 | 536,637 | ||||||
5.00%, due 12/1/27 | 495,000 | 568,503 | ||||||
5.00%, due 12/1/28 | 520,000 | 593,242 | ||||||
California School Facilities Financing Authority, Azusa Unified School District, Revenue Bonds Insured: AGM | 16,000,000 | 3,375,360 | ||||||
California State Educational Facilities Authority, Sutter Health, Revenue Bonds | 5,000,000 | 5,556,300 | ||||||
California State Public Works Board, Various Capital Project, Revenue Bonds | ||||||||
Series G-1 | 1,400,000 | 1,451,310 | ||||||
Series I-1 | 170,000 | 170,250 | ||||||
California Statewide Communities Development Authority, Aspire Public Schools, Revenue Bonds | 780,000 | 786,068 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
California Statewide Communities Development Authority, Cottage Health Obligation Group, Revenue Bonds | $ | 1,475,000 | $ | 1,559,163 | ||||
City of Escondido CA, Unlimited General Obligation | 5,000,000 | 5,642,900 | ||||||
City of Long Beach CA, Airport System, Revenue Bonds | 5,000,000 | 5,217,000 | ||||||
City of Los Angeles, Department of Airports, Revenue Bonds (a) | ||||||||
Series C | 6,990,000 | 8,104,346 | ||||||
Series C | 2,500,000 | 2,914,225 | ||||||
Series C | 2,500,000 | 2,865,450 | ||||||
City of Los AnglesCA, Wastewater Revenue, Revenue Bonds | 10,000,000 | 11,285,900 | ||||||
City of Richmond CA, Wastewater Revenue, Revenue Bonds | 10,000,000 | 11,364,800 | ||||||
Coachella Valley Unified School District, Election 2005, Unlimited General Obligation | 12,385,000 | 13,565,043 | ||||||
Coast Community College District, Election 2012, Unlimited General Obligation | 20,000,000 | 21,417,000 | ||||||
Colton Joint Unified School District, Unlimited General Obligation | 3,495,000 | 3,680,480 | ||||||
Etiwanda School District, Election 2016, Unlimited General Obligation | 5,725,000 | 6,352,574 | ||||||
Firebaugh-Las Deltas Unified School District, Election 2016, Unlimited General Obligation | 3,000,000 | 3,414,300 | ||||||
Fontana Public Finance Authority, Revenue Bonds | 2,640,000 | 2,886,418 |
12 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
California (continued) |
| |||||||
Fontana Unified School District, Unlimited General Obligation | ||||||||
Series C | $ | 14,800,000 | $ | 6,643,720 | ||||
Series C | 15,500,000 | 6,456,370 | ||||||
Fresno Unified School District, Election 2001, Unlimited General Obligation | ||||||||
Series G | 6,000,000 | 2,659,380 | ||||||
Series G | 10,000,000 | 4,114,700 | ||||||
Series G | 23,485,000 | 5,513,339 | ||||||
Golden State Tobacco Securitization Corp., Asset-Backed, Revenue Bonds | 5,410,000 | 5,953,218 | ||||||
Golden State Tobacco Securitization Corp., Revenue Bonds | 15,000,000 | 16,522,350 | ||||||
Lennox School District, Election 2016, Unlimited General Obligation Insured: AGM | 5,000,000 | 5,614,250 | ||||||
Live Oak Elementary School District, Certificates of Participation Insured: AGM | 3,205,000 | 3,501,302 | ||||||
Oakland Unified School District, Alameda County, Unlimited General Obligation | ||||||||
Insured: AGM | 1,160,000 | 1,328,908 | ||||||
Insured: AGM | 1,755,000 | 2,003,561 | ||||||
Insured: AGM | 2,535,000 | 2,885,641 | ||||||
Oceanside Unified School District, Unrefunded Election 2008, Unlimited General Obligation | 560,000 | 72,660 | ||||||
Paramount Unified School District, Unlimited General Obligation Insured: BAM | 25,000,000 | 5,651,250 | ||||||
Pomona Unified School District, Election 2008, Unlimited General Obligation | 3,285,000 | 3,564,619 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
Riverside County Redevelopment Successor Agency, Jurupa Valley Project, Tax Allocation | ||||||||
Series B, Insured: BAM | $ | 2,510,000 | $ | 2,846,415 | ||||
Series B, Insured: BAM | 875,000 | 989,345 | ||||||
Series B, Insured: BAM | 2,645,000 | 2,978,296 | ||||||
Riverside County Transportation Commission, Limited Tax, Revenue Bonds | 23,920,000 | 27,533,355 | ||||||
San Bernardino City Unified School District, Election 2012, Unlimited General Obligation | 1,000,000 | 1,108,380 | ||||||
San Diego Association of Governments, South Bay Expressway, Senior Lien, Revenue Bonds | ||||||||
Series A | 2,475,000 | 2,848,057 | ||||||
Series A | 1,800,000 | 2,055,096 | ||||||
Series A | 1,150,000 | 1,284,285 | ||||||
San Diego Public Facilities Financing Authority, Capital Improvement Projects, Revenue Bonds | 3,000,000 | 3,312,540 | ||||||
San Jose Redevelopment Agency Successor Agency, Tax Allocation | 20,000,000 | 23,006,800 | ||||||
San Marcos School Financing Authority, Revenue Bonds | ||||||||
Insured: AGM | 500,000 | 577,965 | ||||||
Insured: AGM | 1,000,000 | 1,150,920 | ||||||
Insured: AGM | 1,000,000 | 1,145,110 | ||||||
Insured: AGM | 1,100,000 | 1,253,263 | ||||||
San Mateo Union High School District, Election 2010, Unlimited | 6,000,000 | 4,950,660 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
California (continued) |
| |||||||
Santa Clara County Financing Authority, Revenue Bonds | $ | 5,000,000 | $ | 5,174,450 | ||||
Santa Clara Valley Transportation Authority, Revenue Bonds | 3,900,000 | 4,356,768 | ||||||
Simi Valley Unified School District, Election 2016, Unlimited General Obligation | ||||||||
Series A | 1,000,000 | 1,129,010 | ||||||
Series A | 1,000,000 | 1,124,970 | ||||||
Series A | 1,195,000 | 1,338,555 | ||||||
Solano County Community College District, Election 2012, Unlimited General Obligation | 16,460,000 | 18,719,793 | ||||||
Southern California Public Power Authority, Apex Power Project, Revenue Bonds | 4,500,000 | 5,055,120 | ||||||
Southwestern Community College District, Election 2008, Unlimited General Obligation | 13,000,000 | 3,771,040 | ||||||
State of California, Unlimited General Obligation | ||||||||
5.00%, due 8/1/35 | 22,000,000 | 24,945,580 | ||||||
5.25%, due 10/1/39 | 5,635,000 | 6,376,002 | ||||||
6.00%, due 11/1/35 | 2,500,000 | 2,599,000 | ||||||
6.25%, due 11/1/34 | 4,000,000 | 4,170,280 | ||||||
Tahoe-Truckee Unified School District, Unlimited General Obligation | 2,200,000 | 2,448,952 | ||||||
Twin Rivers Unified School District, Unrefunded Election 2006, Unlimited General Obligation Insured: AGM | 5,120,000 | 3,006,669 | ||||||
University of California, Revenue Bonds | 1,725,000 | 1,921,219 |
Principal Amount | Value | |||||||
California (continued) |
| |||||||
Westminster School District, Election 2008, Unlimited General Obligation | $ | 13,900,000 | $ | 2,170,902 | ||||
Yosemite Community College District, Election 2004, Unlimited General Obligation | 15,920,000 | 10,527,418 | ||||||
|
| |||||||
432,812,059 | ||||||||
|
| |||||||
Colorado 2.0% |
| |||||||
City of Colorado Springs CO, Utilities System, Revenue Bonds | ||||||||
Series A-2 | 530,000 | 555,461 | ||||||
Series A-4 | 855,000 | 896,074 | ||||||
Series A-2 | 600,000 | 626,232 | ||||||
Series A-4 | 700,000 | 730,604 | ||||||
Series A-2 | 430,000 | 447,320 | ||||||
Series A-4 | 900,000 | 936,252 | ||||||
Series A-2 | 385,000 | 397,216 | ||||||
Series A-4 | 740,000 | 763,480 | ||||||
Colorado Health Facilities Authority, Evangelical Lutheran Good Samaritan, Revenue Bonds | 1,180,000 | 1,269,196 | ||||||
Colorado State Housing & Finance Authority, Revenue Bonds | 6,060,000 | 6,392,573 | ||||||
Denver City & County Airport Revenue | 5,370,000 | 6,057,736 | ||||||
Denver Convention Center Hotel Authority, Revenue Bonds | ||||||||
5.00%, due 12/1/30 | 1,305,000 | 1,422,920 | ||||||
5.00%, due 12/1/31 | 1,395,000 | 1,518,472 | ||||||
5.00%, due 12/1/32 | 2,500,000 | 2,713,375 | ||||||
5.00%, due 12/1/36 | 1,000,000 | 1,064,880 | ||||||
Rampart Range Metropolitan District No. 1, Revenue Bonds | 13,205,000 | 14,390,677 |
14 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Colorado (continued) |
| |||||||
Regional Transportation District, Certificates of Participation | $ | 15,500,000 | $ | 16,097,060 | ||||
Vista Ridge Metropolitan District, Unlimited General Obligation | 1,250,000 | 1,363,475 | ||||||
|
| |||||||
57,643,003 | ||||||||
|
| |||||||
Connecticut 2.8% |
| |||||||
City of Hartford CT, Unlimited General Obligation | ||||||||
Series A | 2,500,000 | 2,621,250 | ||||||
Series C, Insured: AGM | 7,470,000 | 8,166,578 | ||||||
Series C, Insured: AGM | 2,500,000 | 2,717,525 | ||||||
City of Hartford CT, Unrefunded, Unlimited General Obligation | ||||||||
Series A | 895,000 | 935,767 | ||||||
Series A, Insured: AGM | 195,000 | 206,131 | ||||||
Connecticut State Health & Educational Facility Authority, Quinnipiac University, Revenue Bonds | 10,425,000 | 11,450,820 | ||||||
Connecticut State Housing Finance Authority, Revenue Bonds Subseries C-1 | 6,000,000 | 6,262,560 | ||||||
State of Connecticut Special Tax, Transportation Infrastructure, Revenue Bonds | ||||||||
Series A | 5,000,000 | 5,419,650 | ||||||
Series A, Insured: BAM | 14,470,000 | 16,028,274 | ||||||
Series A | 13,000,000 | 14,129,960 | ||||||
State of Connecticut, Unlimited General Obligation | 12,810,000 | 14,321,964 | ||||||
|
| |||||||
82,260,479 | ||||||||
|
|
Principal Amount | Value | |||||||
District of Columbia 0.9% |
| |||||||
District of Columbia, Friendship Public Charter School, Inc., Revenue Bonds | $ | 5,500,000 | $ | 5,663,240 | ||||
District of Columbia, Gallery Place Project, Tax Allocation | 525,000 | 557,865 | ||||||
District of Columbia, KIPP Charter School, Revenue Bonds | ||||||||
6.00%, due 7/1/43 | 1,000,000 | 1,159,830 | ||||||
6.00%, due 7/1/48 | 1,575,000 | 1,826,732 | ||||||
Metropolitan Washington Airports Authority Dulles Toll Road, Revenue Bonds | ||||||||
Series C, Insured: AGC | 8,000,000 | 9,769,920 | ||||||
Series B | 7,140,000 | 8,846,603 | ||||||
|
| |||||||
27,824,190 | ||||||||
|
| |||||||
Florida 1.3% |
| |||||||
City of Miami Beach FL Parking, Revenue Bonds | ||||||||
Insured: BAM | 1,990,000 | 2,208,124 | ||||||
Insured: BAM | 2,500,000 | 2,737,100 | ||||||
City of Orlando FL, Unrefunded Third Lien, Tourist Development Tax, | 4,375,000 | 4,386,112 | ||||||
County of Miami-Dade FL Aviation, Revenue Bonds | 750,000 | 839,258 | ||||||
County of Miami-Dade Florida Water & Sewer System, Revenue Bonds | ||||||||
Series A | 9,500,000 | 9,439,010 | ||||||
Series B | 10,000,000 | 11,174,000 | ||||||
Florida Housing Finance Corp., | 2,750,000 | 2,870,945 | ||||||
JEA Electric System, Revenue Bonds | 4,500,000 | 4,543,605 | ||||||
Orange County Health Facilities Authority, Presbyterian Retirement Communities, Revenue Bonds | 1,500,000 | 1,622,595 | ||||||
|
| |||||||
39,820,749 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Georgia 0.8% |
| |||||||
Appling County Development Authority, Georgia Power Co., Plant Hatch Project, Revenue Bonds | $ | 2,400,000 | $ | 2,400,000 | ||||
Burke County Development Authority, Georgia Power Co., Vogtle Project, Revenue Bonds | 200,000 | 200,000 | ||||||
Dalton GA, Board of Water Light & Sinking Fund Commissioners, Revenue Bonds | 2,055,000 | 2,285,407 | ||||||
Heard County Development Authority, Georgia Power Co. Plant Wansley, Revenue Bonds | 3,300,000 | 3,300,000 | ||||||
Monroe County Development Authority, Georgia Power Co., Scherer Project, Revenue Bonds | 15,650,000 | 15,650,000 | ||||||
|
| |||||||
23,835,407 | ||||||||
|
| |||||||
Guam 1.4% |
| |||||||
Antonio B Won Pat International Airport Authority, Revenue Bonds | 5,000,000 | 5,655,100 | ||||||
Guam Government, Waterworks Authority, Revenue Bonds | ||||||||
5.00%, due 7/1/36 | 1,750,000 | 1,832,653 | ||||||
5.00%, due 1/1/46 | 2,500,000 | 2,591,600 | ||||||
Guam Power Authority, Revenue Bonds | ||||||||
Series A, Insured: AGM | 5,610,000 | 6,034,172 | ||||||
Series A, Insured: AGM | 655,000 | 698,400 | ||||||
Territory of Guam, Revenue Bonds | ||||||||
Series D | 8,350,000 | 8,847,076 | ||||||
Series A | 3,085,000 | 3,185,170 | ||||||
Series A | 2,000,000 | 2,098,980 | ||||||
Series A | 2,700,000 | 2,942,757 | ||||||
Territory of Guam, Section 30, Revenue Bonds | ||||||||
Series A | 2,265,000 | 2,472,270 | ||||||
Series A | 1,250,000 | 1,335,550 |
Principal Amount | Value | |||||||
Guam (continued) |
| |||||||
Territory of Guam, Section 30, Revenue Bonds (continued) | ||||||||
Series A | $ | 2,290,000 | $ | 2,433,720 | ||||
Series A | 1,000,000 | 1,055,710 | ||||||
|
| |||||||
41,183,158 | ||||||||
|
| |||||||
Hawaii 0.1% |
| |||||||
State of Hawaii Department of Budget & Finance, Hawaiian Electric Co., Revenue Bonds | 3,000,000 | 3,080,010 | ||||||
|
| |||||||
Illinois 11.5% |
| |||||||
Carol Stream Park District, Unlimited General Obligation | 3,985,000 | 4,318,624 | ||||||
Chicago Board of Education, School Reform, Unlimited General Obligation | 19,995,000 | 14,099,874 | ||||||
Chicago Board of Education, Special Tax | 19,485,000 | 22,267,653 | ||||||
Chicago Board of Education, Unlimited General Obligation | ||||||||
Series A, Insured: AGM | 8,250,000 | 9,178,207 | ||||||
Series C, Insured: AGM | 16,000,000 | 16,034,720 | ||||||
Series A, Insured: AGM | 11,455,000 | 12,152,609 | ||||||
Chicago O’Hare International Airport, Prerefunded Third Lien, Revenue Bonds | 1,815,000 | 1,947,604 | ||||||
Chicago O’Hare International Airport, Unrefunded Third Lien, Revenue Bonds | 435,000 | 460,047 | ||||||
Chicago Park District, Limited General Obligation | ||||||||
Series A | 1,000,000 | 1,106,290 | ||||||
Series A | 750,000 | 822,195 | ||||||
Series A | 1,000,000 | 1,081,760 | ||||||
Series A | 2,000,000 | 2,128,540 |
16 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Illinois (continued) |
| |||||||
Chicago Transit Authority, Second Lien, Revenue Bonds | $ | 10,000,000 | $ | 10,459,300 | ||||
Chicago, Unlimited General Obligation | 20,000,000 | 22,231,400 | ||||||
City of Chicago IL Motor Fuel Tax, Revenue Bonds | 4,725,000 | 4,943,248 | ||||||
City of Chicago IL, Unlimited General Obligation | ||||||||
Series A, Insured: AGM | 10,000,000 | 10,271,900 | ||||||
Series A, Insured: BAM | 6,000,000 | 6,895,980 | ||||||
City of Chicago IL, Wastewater Transmission, Revenue Bonds | ||||||||
5.00%, due 1/1/28 | 1,000,000 | 1,081,050 | ||||||
Series B, Insured: AGM | 7,585,000 | 8,307,547 | ||||||
5.00%, due 1/1/33 | 2,000,000 | 2,121,100 | ||||||
5.00%, due 1/1/39 | 8,420,000 | 8,865,081 | ||||||
5.00%, due 1/1/44 | 13,840,000 | 14,564,939 | ||||||
Series A | 7,675,000 | 8,025,057 | ||||||
Series A, Insured: AGM | 4,000,000 | 4,327,720 | ||||||
City of Chicago IL, Wastewater, Revenue Bonds | ||||||||
5.00%, due 11/1/27 | 1,000,000 | 1,087,840 | ||||||
Series 2017-2, Insured: AGM | 2,000,000 | 2,233,120 | ||||||
5.00%, due 11/1/29 | 1,700,000 | 1,836,867 | ||||||
Series 2017-2, Insured: AGM | 3,000,000 | 3,300,990 | ||||||
Series 2017-2, Insured: AGM | 5,000,000 | 5,465,550 | ||||||
Series 2017-2, Insured: AGM | 10,000,000 | 10,891,300 | ||||||
Insured: AGM | 4,535,000 | 5,043,101 | ||||||
Insured: AGM | 1,785,000 | 1,979,244 | ||||||
Insured: AGM | 3,025,000 | 3,342,050 | ||||||
City of Country Club Hills IL, Unlimited General Obligation | 455,000 | 470,429 |
Principal Amount | Value | |||||||
Illinois (continued) |
| |||||||
Cook County Community College District No. 508, City College of Chicago, Unlimited General Obligation Insured: BAM | $ | 5,000,000 | $ | 5,451,900 | ||||
Cook County Community High School District No. 212 Leyden, Revenue Bonds | ||||||||
Series C, Insured: BAM | 3,370,000 | 3,667,706 | ||||||
Series C, Insured: BAM | 2,610,000 | 2,837,592 | ||||||
Illinois Finance Authority, Rehab Institute of Chicago, Revenue Bonds | 9,600,000 | 10,413,216 | ||||||
Illinois Sports Facilities Authority, Revenue Bonds Insured: AGM | 5,000,000 | 5,410,850 | ||||||
Madison County Community Unit School, District No. 7 Edwardsville, Unlimited General Obligation | ||||||||
Insured: BAM | 1,240,000 | 1,241,773 | ||||||
Insured: BAM | 2,475,000 | 2,519,624 | ||||||
Insured: BAM | 2,085,000 | 2,137,751 | ||||||
Metropolitan Pier & Exposition Authority, Capital Appreciation, Revenue Bonds | 14,250,000 | 8,545,155 | ||||||
Metropolitan Pier & Exposition Authority, Capital Appreciation-McCormick, Revenue Bonds | 58,750,000 | 24,273,737 | ||||||
Public Building Commission of Chicago, Chicago Transit Authority, Revenue Bonds Insured: AMBAC | 580,000 | 633,128 | ||||||
Rock Island County, Public Building Commission, Revenue Bonds | ||||||||
Insured: AGM | 500,000 | 546,120 | ||||||
Insured: AGM | 2,645,000 | 2,843,031 | ||||||
Southern Illinois University, Housing & Auxiliary Facilities System, Revenue Bonds | ||||||||
Series B, Insured: BAM | 1,175,000 | 1,298,164 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Illinois (continued) |
| |||||||
Southern Illinois University, Housing & Auxiliary Facilities System, Revenue Bonds (continued) | ||||||||
Series B, Insured: BAM | $ | 1,620,000 | $ | 1,754,606 | ||||
Series B, Insured: BAM | 1,000,000 | 1,077,140 | ||||||
State of Illinois, Unlimited General Obligation Insured: BAM | 12,600,000 | 12,056,940 | ||||||
United City of Yorkville, Special Tax Insured: AGM | 3,780,000 | 4,090,262 | ||||||
Village of Bellwood IL, Unlimited | 1,500,000 | 1,644,915 | ||||||
Village of Crestwood IL, Alternative Revenue Source, Unlimited General Obligation | ||||||||
Series B, Insured: BAM | 750,000 | 809,948 | ||||||
Series B, Insured: BAM | 850,000 | 917,941 | ||||||
Series B, Insured: BAM | 955,000 | 1,029,461 | ||||||
Village of Oswego IL, Unlimited General Obligation | 7,670,000 | 8,501,275 | ||||||
Village of Rosemont IL, Corporate Purpose Bond, Unlimited General Obligation | ||||||||
Series A, Insured: AGM | 8,090,000 | 8,783,232 | ||||||
Series A, Insured: AGM | 3,835,000 | 4,089,261 | ||||||
|
| |||||||
339,917,664 | ||||||||
|
| |||||||
Indiana 0.5% |
| |||||||
Indiana Finance Authority, Educational Facilities-Butler University, Revenue Bonds | ||||||||
Series B | 2,100,000 | 2,244,375 | ||||||
Series A | 2,215,000 | 2,363,737 | ||||||
Series B | 2,210,000 | 2,358,402 | ||||||
Series B | 2,320,000 | 2,474,303 |
Principal Amount | Value | |||||||
Indiana (continued) |
| |||||||
Indiana Housing & Community Development Authority Single Family Mortgage, Revenue Bonds | $ | 3,000,000 | $ | 3,136,320 | ||||
Indianapolis Local Public Improvement Bond Bank, Unrefunded-Waterworks Project, Revenue Bonds | 885,000 | 890,106 | ||||||
|
| |||||||
13,467,243 | ||||||||
|
| |||||||
Iowa 0.4% |
| |||||||
City of Coralville IA, Certificates of Participation | ||||||||
Series E | 545,000 | 546,046 | ||||||
Series E | 1,405,000 | 1,405,422 | ||||||
Series E | 1,320,000 | 1,315,591 | ||||||
Iowa Finance Authority, Mortgage-Backed Securities Program, Revenue Bonds | 2,000,000 | 2,094,000 | ||||||
Iowa Higher Education Loan Authority, Loras College, Revenue Bonds | 6,700,000 | 6,700,000 | ||||||
|
| |||||||
12,061,059 | ||||||||
|
| |||||||
Kansas 0.6% |
| |||||||
City of Hutchinson KS, Hutchinson Regional Medical Center, Inc., Revenue Bonds | ||||||||
5.00%, due 12/1/26 | 565,000 | 612,183 | ||||||
5.00%, due 12/1/28 | 410,000 | 439,520 | ||||||
5.00%, due 12/1/30 | 500,000 | 529,965 | ||||||
5.00%, due 12/1/36 | 1,150,000 | 1,196,460 | ||||||
Sedgwick County Unified School District No. 266 Maize, Unlimited General Obligation | 3,000,000 | 3,392,310 | ||||||
University of Kansas Hospital Authority, KU Health System, Revenue Bonds | ||||||||
5.00%, due 9/1/33 | 2,500,000 | 2,748,275 | ||||||
5.00%, due 9/1/34 | 5,000,000 | 5,483,750 | ||||||
5.00%, due 9/1/35 | 2,800,000 | 3,058,412 | ||||||
|
| |||||||
17,460,875 | ||||||||
|
|
18 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Kentucky 0.1% |
| |||||||
City of Ashland KY, King’s Daughters Medical Center Project, Revenue Bonds | ||||||||
Series A | $ | 1,070,000 | $ | 1,090,480 | ||||
Series A | 1,525,000 | 1,631,872 | ||||||
|
| |||||||
2,722,352 | ||||||||
|
| |||||||
Louisiana 0.6% |
| |||||||
City of Shreveport LA, Unlimited General Obligation | ||||||||
Insured: BAM | 2,285,000 | 2,572,407 | ||||||
Insured: BAM | 5,355,000 | 5,921,452 | ||||||
Louisiana Local Government Environmental Facilities & Community Development Authority, McNeese State University Student Parking Co., Revenue Bonds | ||||||||
Insured: AGM | 335,000 | 351,281 | ||||||
Insured: AGM | 350,000 | 365,414 | ||||||
Louisiana Public Facilities Authority, Loyola University, Revenue Bonds | 2,930,000 | 3,184,295 | ||||||
Louisiana Public Facilities Authority, Unrefunded-Ochsner Clinic Foundation Project, Revenue Bonds | 2,010,000 | 2,183,202 | ||||||
Louisiana Stadium & Exposition District, Revenue Bonds | 1,485,000 | 1,624,130 | ||||||
Terrebonne Parish LA, Sales & Use Tax, Morganza Levee Project, Revenue Bonds | ||||||||
Series B, Insured: AGM | 655,000 | 339,172 | ||||||
Series B, Insured: AGM | 1,520,000 | 747,171 | ||||||
Series B, Insured: AGM | 1,000,000 | 443,680 | ||||||
|
| |||||||
17,732,204 | ||||||||
|
| |||||||
Maryland 0.9% |
| |||||||
Maryland Stadium Authority, Construction & Revitalization, Revenue Bonds | 24,645,000 | 27,253,427 | ||||||
|
|
Principal Amount | Value | |||||||
Massachusetts 0.7% |
| |||||||
Massachusetts Development Finance Agency, UMass Boston Student Housing Project, Revenue Bonds | ||||||||
5.00%, due 10/1/30 | $ | 1,200,000 | $ | 1,285,728 | ||||
5.00%, due 10/1/31 | 1,200,000 | 1,281,516 | ||||||
5.00%, due 10/1/32 | 1,240,000 | 1,319,906 | ||||||
5.00%, due 10/1/33 | 1,500,000 | 1,591,440 | ||||||
5.00%, due 10/1/34 | 2,170,000 | 2,294,775 | ||||||
Massachusetts Development Finance Agency, WGBH Educational Foundation, Revenue Bonds | 1,000,000 | 1,031,280 | ||||||
Massachusetts Educational Financing Authority, Revenue Bonds | ||||||||
Series B | 1,315,000 | 1,348,861 | ||||||
Series I | 1,235,000 | 1,265,294 | ||||||
Massachusetts Housing Finance Agency, Single Family Housing, Revenue Bonds | 3,640,000 | 3,805,802 | ||||||
Massachusetts State Development Finance Agency, Prerefunded-Suffolk University, Revenue Bonds | 1,285,000 | 1,319,811 | ||||||
Massachusetts State Development Finance Agency, Unrefunded-Suffolk University, Revenue Bonds | ||||||||
Series A | 715,000 | 731,588 | ||||||
Series A | 2,150,000 | 2,202,374 | ||||||
Metropolitan Boston Transit Parking Corp., Revenue Bonds | 2,000,000 | 2,126,980 | ||||||
|
| |||||||
21,605,355 | ||||||||
|
| |||||||
Michigan 3.1% |
| |||||||
City of Detroit MI, Sewage Disposal System, Senior Lien, Revenue Bonds | 5,000,000 | 5,163,200 | ||||||
Detroit City School District, Improvement School Building & Site, Unlimited General Obligation | ||||||||
Series A, Insured: Q-SBLF | 750,000 | 807,720 | ||||||
Series A, Insured: Q-SBLF | 7,500,000 | 8,071,950 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Michigan (continued) |
| |||||||
Detroit City School District, Improvement School Building & Site, Unlimited General Obligation (continued) | ||||||||
Series A, Insured: Q-SBLF | $ | 3,620,000 | $ | 3,886,070 | ||||
Series A, Insured: Q-SBLF | 4,535,000 | 4,840,206 | ||||||
Downriver Utility Wastewater Authority, Revenue Bonds Insured: AGM | 1,600,000 | 1,773,424 | ||||||
Great Lakes Water Authority, Sewage Disposal System, Revenue Bonds Senior Lien-Series A | 14,150,000 | 14,988,953 | ||||||
Great Lakes Water Authority, Water Supply System, Revenue Bonds | ||||||||
Senior Lien-Series A | 5,000,000 | 5,297,600 | ||||||
Senior Lien-Series A | 5,550,000 | 5,986,507 | ||||||
Lincoln Consolidated School District, Unlimited General Obligation | ||||||||
Series A, Insured: AGM | 2,030,000 | 2,302,243 | ||||||
Series A, Insured: AGM | 1,455,000 | 1,632,466 | ||||||
Series A, Insured: AGM | 1,500,000 | 1,626,660 | ||||||
Livonia Public School District, | 4,365,000 | 4,712,803 | ||||||
Michigan Finance Authority, Great Lakes Water, Revenue Bonds | ||||||||
Series C-7, Insured: NATL-RE | 2,500,000 | 2,683,075 | ||||||
Series C-3, Insured: AGM | 3,000,000 | 3,264,600 | ||||||
Series C-1 | 2,500,000 | 2,644,550 | ||||||
Michigan Finance Authority, Local Government Loan Program, Revenue Bonds | ||||||||
Series D2, Insured: AGM | 500,000 | 551,165 | ||||||
Series D-1 | 500,000 | 542,665 | ||||||
Series D-1 | 500,000 | 540,200 |
Principal Amount | Value | |||||||
Michigan (continued) |
| |||||||
Michigan Finance Authority, Local Government Loan Program, Revenue Bonds (continued) | ||||||||
Series D1, Insured: AGM | $ | 2,000,000 | $ | 2,166,720 | ||||
Series D6, Insured: NATL-RE | 7,400,000 | 7,883,220 | ||||||
Michigan Finance Authority, Wayne County Criminal Justice Center Project, Revenue Bonds | ||||||||
5.00%, due 11/1/24 | 750,000 | 846,690 | ||||||
5.00%, due 11/1/25 | 1,000,000 | 1,140,280 | ||||||
5.00%, due 11/1/27 | 1,200,000 | 1,392,120 | ||||||
5.00%, due 11/1/30 | 500,000 | 572,340 | ||||||
5.00%, due 11/1/31 | 750,000 | 854,393 | ||||||
Saginaw City School District, Unlimited General Obligation | ||||||||
Insured: Q-SBLF | 260,000 | 285,342 | ||||||
Insured: Q-SBLF | 350,000 | 382,428 | ||||||
Insured: Q-SBLF | 750,000 | 816,398 | ||||||
Insured: Q-SBLF | 250,000 | 269,075 | ||||||
Insured: Q-SBLF | 350,000 | 374,819 | ||||||
Insured: Q-SBLF | 425,000 | 453,713 | ||||||
Wayne County Michigan, Capital Improvement, Limited General Obligation | 2,500,000 | 2,505,350 | ||||||
|
| |||||||
91,258,945 | ||||||||
|
| |||||||
Minnesota 0.0%‡ |
| |||||||
Housing & Redevelopment Authority of The City of St. Paul Minnesota, Fairview Health Services, Revenue Bonds | 1,000,000 | 992,080 | ||||||
|
| |||||||
Mississippi 0.1% |
| |||||||
Mississippi Development Bank, Hinds County School District Project, Revenue Bonds | 1,510,000 | 1,654,885 |
20 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Mississippi (continued) |
| |||||||
Mississippi Home Corp., Mortgage Revenue, Revenue Bonds | $ | 2,000,000 | $ | 2,093,540 | ||||
|
| |||||||
3,748,425 | ||||||||
|
| |||||||
Missouri 0.9% |
| |||||||
City of Kansas MO, Improvement Downtown Arena Project, Revenue Bonds | 10,055,000 | 10,932,500 | ||||||
Health & Educational Facilities Authority of the State of Missouri, SSM Health Care, Revenue Bonds | 4,000,000 | 4,382,320 | ||||||
Health & Educational Facilities Authority of the State of Missouri, St. Lukes Health System, Inc., Revenue Bonds | 5,000,000 | 5,527,850 | ||||||
Joplin Industrial Development Authority, Freeman Health System, Revenue Bonds | 605,000 | 639,140 | ||||||
Missouri Housing Development Commission Mortgage Revenue, Homeownership Loan Program, Revenue Bonds | 4,675,000 | 4,939,839 | ||||||
|
| |||||||
26,421,649 | ||||||||
|
| |||||||
Montana 1.0% |
| |||||||
Missoula County Elementary School District No. 1 School Building, Unlimited General Obligation | ||||||||
4.00%, due 7/1/30 | 495,000 | 523,972 | ||||||
4.00%, due 7/1/31 | 345,000 | 363,589 | ||||||
4.00%, due 7/1/32 | 590,000 | 619,518 | ||||||
4.00%, due 7/1/33 | 555,000 | 580,635 | ||||||
Missoula High School District No. 1 School Building, Unlimited General Obligation | ||||||||
4.00%, due 7/1/30 | 585,000 | 619,240 | ||||||
4.00%, due 7/1/31 | 335,000 | 351,760 | ||||||
4.00%, due 7/1/33 | 350,000 | 364,830 | ||||||
4.00%, due 7/1/34 | 370,000 | 384,552 | ||||||
4.00%, due 7/1/35 | 515,000 | 533,303 |
Principal Amount | Value | |||||||
Montana (continued) |
| |||||||
Montana Board of Housing, Revenue Bonds | ||||||||
Series B | $ | 1,645,000 | $ | 1,593,873 | ||||
Series B | 2,125,000 | 2,017,751 | ||||||
Series B | 1,775,000 | 1,851,254 | ||||||
Montana Facilities Finance Authority, Revenue Bonds | ||||||||
5.00%, due 2/15/30 | 1,790,000 | 1,980,241 | ||||||
5.00%, due 2/15/31 | 1,500,000 | 1,650,345 | ||||||
5.00%, due 2/15/32 | 775,000 | 849,772 | ||||||
5.00%, due 2/15/33 | 1,320,000 | 1,443,394 | ||||||
5.00%, due 2/15/34 | 1,200,000 | 1,309,500 | ||||||
Yellowstone County K-12, School District No 26 Lockwood, Unlimited General Obligation | ||||||||
5.00%, due 7/1/29 | 2,260,000 | 2,605,916 | ||||||
5.00%, due 7/1/30 | 2,500,000 | 2,866,950 | ||||||
5.00%, due 7/1/31 | 3,015,000 | 3,441,381 | ||||||
5.00%, due 7/1/32 | 3,300,000 | 3,752,034 | ||||||
|
| |||||||
29,703,810 | ||||||||
|
| |||||||
Nebraska 2.2% |
| |||||||
Central Plains Energy, Project No. 3, Revenue Bonds | ||||||||
5.00%, due 9/1/32 | 5,190,000 | 5,580,288 | ||||||
5.00%, due 9/1/42 | 13,960,000 | 15,009,792 | ||||||
Series A | 20,000,000 | 22,200,600 | ||||||
5.25%, due 9/1/37 | 15,535,000 | 16,843,047 | ||||||
Nebraska Investment Finance Authority Single Family Housing, Revenue Bonds | 5,500,000 | 5,740,405 | ||||||
|
| |||||||
65,374,132 | ||||||||
|
| |||||||
New Hampshire 0.2% |
| |||||||
City of Manchester NH, General Airport, Revenue Bonds | 1,800,000 | 1,919,034 | ||||||
New Hampshire Health & Education Facilities Authority, Southern University, Revenue Bonds | ||||||||
5.00%, due 1/1/31 | 905,000 | 999,971 | ||||||
5.00%, due 1/1/32 | 950,000 | 1,045,883 | ||||||
5.00%, due 1/1/33 | 1,000,000 | 1,097,590 | ||||||
5.00%, due 1/1/34 | 1,050,000 | 1,149,687 | ||||||
5.00%, due 1/1/35 | 600,000 | 654,972 | ||||||
|
| |||||||
6,867,137 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
New Jersey 4.8% |
| |||||||
Atlantic County Improvement Authority, Stockton University-Atlantic City, Revenue Bonds | ||||||||
Series A, Insured: AGM | $ | 2,670,000 | $ | 2,952,192 | ||||
Series A, Insured: AGM | 1,305,000 | 1,438,293 | ||||||
Series A, Insured: AGM | 1,395,000 | 1,532,561 | ||||||
Series A, Insured: AGM | 1,855,000 | 2,032,709 | ||||||
City of Atlantic City NJ, Unlimited General Obligation | ||||||||
Series B, Insured: AGM | 6,270,000 | 6,148,425 | ||||||
Series B, Insured: AGM | 4,500,000 | 4,939,560 | ||||||
New Brunswick Parking Authority, Revenue Bonds | ||||||||
Series A, Insured: BAM | 5,880,000 | 6,695,027 | ||||||
Series A, Insured: BAM | 2,370,000 | 2,684,380 | ||||||
Series A, Insured: BAM | 4,605,000 | 5,191,907 | ||||||
Series A, Insured: BAM | 6,780,000 | 7,619,093 | ||||||
New Jersey Building Authority, Unrefunded, Revenue Bonds | ||||||||
Series A, Insured: BAM | 2,015,000 | 2,242,453 | ||||||
Series A, Insured: BAM | 1,805,000 | 1,999,922 | ||||||
New Jersey Economic Development Authority, Revenue Bonds | ||||||||
5.00%, due 1/1/28 (a) | 1,000,000 | 1,080,060 | ||||||
Series A, Insured: BAM | 2,000,000 | 2,235,120 | ||||||
5.50%, due 1/1/26 (a) | 1,000,000 | 1,113,160 | ||||||
New Jersey Educational Facilities Authority, Stockton University, Revenue Bonds | ||||||||
Series A, Insured: BAM | 4,775,000 | 5,313,668 | ||||||
Series A, Insured: BAM | 5,000,000 | 5,535,550 | ||||||
Series A, Insured: BAM | 3,000,000 | 3,306,420 |
Principal Amount | Value | |||||||
New Jersey (continued) |
| |||||||
New Jersey Health Care Facilities Financing Authority, Hackensack Meridian Health, Inc., Revenue Bonds | $ | 10,000,000 | $ | 11,096,500 | ||||
New Jersey Transportation Trust Fund Authority, Federal Highway Reimbursement, Revenue Bonds | ||||||||
Series A | 4,800,000 | 5,277,696 | ||||||
Series A | 8,380,000 | 9,161,267 | ||||||
Series A | 3,000,000 | 3,265,080 | ||||||
New Jersey Transportation Trust Fund Authority, Revenue Bonds | 30,000,000 | 14,804,100 | ||||||
New Jersey Turnpike Authority, Revenue Bonds | ||||||||
Series E | 4,000,000 | 4,309,200 | ||||||
Series D-4, Insured: AGM | 5,000,000 | 5,775,250 | ||||||
Newark Housing Authority, Revenue Bonds | ||||||||
Insured: AGM | 500,000 | 514,965 | ||||||
Insured: AGM | 250,000 | 254,490 | ||||||
Insured: AGM | 250,000 | 252,923 | ||||||
Insured: AGM | 225,000 | 226,852 | ||||||
Insured: AGM | 750,000 | 836,392 | ||||||
Insured: AGM | 1,740,000 | 1,889,101 | ||||||
Tobacco Settlement Financing Corp., Revenue Bonds | ||||||||
Series A | 3,000,000 | 3,360,930 | ||||||
Series A | 10,000,000 | 10,897,100 | ||||||
Series A | 1,500,000 | 1,629,555 | ||||||
Series A | 2,900,000 | 3,138,438 | ||||||
|
| |||||||
140,750,339 | ||||||||
|
| |||||||
New Mexico 0.2% |
| |||||||
City of Farmington NM, Revenue Bonds | 2,000,000 | 2,102,140 |
22 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
New Mexico (continued) |
| |||||||
New Mexico Mortgage Finance Authority, Single Family Mortgage Program, Revenue Bonds | $ | 3,500,000 | $ | 3,659,425 | ||||
|
| |||||||
5,761,565 | ||||||||
|
| |||||||
New York 15.6% |
| |||||||
Build NYC Resource Corp., Royal Charter Properties, Revenue Bonds | ||||||||
Insured: AGM | 975,000 | 1,005,001 | ||||||
Insured: AGM | 1,025,000 | 1,078,197 | ||||||
Insured: AGM | 1,075,000 | 1,152,798 | ||||||
Insured: AGM | 740,000 | 807,118 | ||||||
City of New York NY, Unlimited General Obligation | 20,000,000 | 23,157,400 | ||||||
Long Island Power Authority, | 10,000,000 | 10,950,100 | ||||||
Long Island Power Authority, Revenue Bonds | ||||||||
Series A, Insured: BAM | 10,000,000 | 11,050,900 | ||||||
Series B | 8,970,000 | 9,740,971 | ||||||
Metropolitan Transportation Authority, Green, Revenue Bonds | 4,500,000 | 5,015,925 | ||||||
Metropolitan Transportation Authority, Revenue Bonds | 20,000,000 | 22,448,800 | ||||||
New York City Transitional Finance Authority, Building Aid, Revenue Bonds | ||||||||
Series S-1 | 6,060,000 | 6,654,668 | ||||||
Series S-2 | 5,000,000 | 5,507,150 | ||||||
Series S-1 | 10,000,000 | 10,899,200 | ||||||
Series S-1 | 11,880,000 | 12,895,027 |
Principal Amount | Value | |||||||
New York (continued) |
| |||||||
New York City Transitional Finance Authority, Future Tax Secured, Revenue Bonds | ||||||||
Subseries F-1 | $ | 4,000,000 | $ | 4,490,840 | ||||
Series B-1 | 10,000,000 | 11,070,400 | ||||||
5.00%, due 5/1/33 | 10,000,000 | 11,163,200 | ||||||
Series B-1 | 5,000,000 | 5,616,750 | ||||||
Series A-2 | 7,795,000 | 8,756,513 | ||||||
Series A1 | 5,100,000 | 5,620,353 | ||||||
Series E-1 | 2,500,000 | 2,717,425 | ||||||
Subseries F-1 | 11,500,000 | 12,678,520 | ||||||
New York City Water & Sewer System, Revenue Bonds | 6,235,000 | 7,196,063 | ||||||
New York Liberty Development Corp., Bank of America, Revenue Bonds Class 2 | 5,000,000 | 5,196,400 | ||||||
New York Liberty Development Corp., Revenue Bonds | 12,315,000 | 13,133,701 | ||||||
New York Liberty Development Corp., World Trade Center, Revenue Bonds | ||||||||
5.00%, due 11/15/31 | 5,000,000 | 5,321,000 | ||||||
5.75%, due 11/15/51 | 18,990,000 | 20,713,722 | ||||||
New York Mortgage Agency, Homeowner Mortgage, Revenue Bonds | 6,540,000 | 6,231,312 | ||||||
New York State Dormitory Authority, New York University, Revenue Bonds | 6,610,000 | 7,390,178 | ||||||
New York State Dormitory Authority, Revenue Bonds | 4,190,000 | 4,643,484 | ||||||
New York State Dormitory Authority, Sales Tax, Revenue Bonds | ||||||||
Series A, Group B | 5,000,000 | 5,624,800 | ||||||
Series B | 26,080,000 | 29,070,594 | ||||||
5.00%, due 3/15/40 | 22,000,000 | 24,291,300 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
New York (continued) |
| |||||||
New York State Dormitory Authority, Sales Tax, Revenue Bonds (continued) | ||||||||
Series E | $ | 20,000,000 | $ | 22,360,600 | ||||
5.00%, due 3/15/44 | 5,000,000 | 5,509,350 | ||||||
New York State Dormitory Authority, State Personal Income Tax, Revenue Bonds | 13,490,000 | 14,997,642 | ||||||
New York State Dormitory Authority, University Facilities, Revenue Bonds | ||||||||
Series A | 1,000,000 | 1,112,010 | ||||||
Series A | 1,000,000 | 1,110,440 | ||||||
New York State Urban Development Corp., Personal Income Tax, Revenue Bonds | 12,350,000 | 13,971,802 | ||||||
New York Transportation Development Corp., LaGuardia Airport Terminal B Redevelopment Project, | ||||||||
Insured: AGM | 10,925,000 | 11,107,447 | ||||||
Series A, Insured: AGM | 7,635,000 | 7,688,598 | ||||||
Series A, Insured: AGM | 16,240,000 | 16,312,918 | ||||||
Rensselaer City School District, Certificates of Participation | ||||||||
Insured: AGM | 1,060,000 | 1,219,827 | ||||||
Insured: AGM | 1,000,000 | 1,139,050 | ||||||
Insured: AGM | 1,880,000 | 2,094,094 | ||||||
Insured: AGM | 2,000,000 | 2,212,200 | ||||||
Syracuse Industrial Development | ||||||||
5.00%, due 1/1/29 | 1,615,000 | 1,732,330 | ||||||
Series A | 2,100,000 | 2,249,835 | ||||||
Triborough Bridge & Tunnel Authority, Revenue Bonds | ||||||||
Series B | 8,560,000 | 9,607,744 | ||||||
Series B | 3,600,000 | 4,006,692 |
Principal Amount | Value | |||||||
New York (continued) |
| |||||||
Triborough Bridge & Tunnel Authority, Revenue Bonds (continued) | ||||||||
Series C-2 | $ | 10,000,000 | $ | 11,120,500 | ||||
Series A | 7,835,000 | 8,727,015 | ||||||
TSASC, Inc., Revenue Bonds | ||||||||
Series A | 2,000,000 | 2,147,000 | ||||||
Series A | 5,000,000 | 5,330,050 | ||||||
Series A | 2,865,000 | 3,043,461 | ||||||
|
| |||||||
462,090,415 | ||||||||
|
| |||||||
North Carolina 0.0%‡ |
| |||||||
North Carolina Medical Care Commission, North Carolina Baptist Hospital, Revenue Bonds | 1,000,000 | 1,046,950 | ||||||
|
| |||||||
North Dakota 0.3% |
| |||||||
North Dakota Housing Finance Agency, Home Mortgage Finance Program, Revenue Bonds | 9,000,000 | 9,498,060 | ||||||
|
| |||||||
Ohio 0.7% |
| |||||||
City of Cleveland OH, Airport System, Revenue Bonds | 3,000,000 | 3,212,490 | ||||||
City of Cleveland OH, Income Tax, Bridges & Roadways Improvements, Revenue Bonds, | 1,500,000 | 1,639,525 | ||||||
Clermont County Port Authority, W. Clermont Local School District Project, Revenue Bonds | ||||||||
Insured: BAM | 650,000 | 723,151 | ||||||
Insured: BAM | 2,200,000 | 2,443,166 | ||||||
Insured: BAM | 1,335,000 | 1,478,112 | ||||||
Cleveland-Cuyahoga County Port Authority, Revenue Bonds | 1,980,000 | 2,127,351 |
24 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Ohio (continued) |
| |||||||
County of Hamilton OH, Christ Hospital Project, Revenue Bonds | $ | 2,000,000 | $ | 2,175,580 | ||||
Ohio Housing Finance Agency, Residential Mortgage Revenue, Revenue Bonds | 6,000,000 | 6,438,240 | ||||||
|
| |||||||
20,237,615 | ||||||||
|
| |||||||
Oklahoma 1.0% |
| |||||||
Garfield County Educational Facilities Authority, Enid Public Schools Project, Revenue Bonds | ||||||||
Series A | 1,800,000 | 2,060,316 | ||||||
Series A | 3,780,000 | 4,278,582 | ||||||
Series A | 5,000,000 | 5,615,150 | ||||||
Series A | 4,620,000 | 5,147,743 | ||||||
Lincoln County Educational Facilities Authority, Stroud Public Schools Project, Revenue Bonds | ||||||||
5.00%, due 9/1/28 | 3,200,000 | 3,539,968 | ||||||
5.00%, due 9/1/29 | 2,370,000 | 2,603,018 | ||||||
Oklahoma Housing Finance Agency, Homeownership Loan Program, Revenue Bonds | 3,350,000 | 3,623,863 | ||||||
Oklahoma State Municipal Power Authority, Revenue Bonds | ||||||||
Series A | 250,000 | 281,150 | ||||||
Series A | 900,000 | 1,007,838 | ||||||
Series A | 805,000 | 894,355 | ||||||
Series A | 650,000 | 718,211 | ||||||
Tulsa Airports Improvement Trust, Revenue Bonds | 500,000 | 519,320 | ||||||
|
| |||||||
30,289,514 | ||||||||
|
|
Principal Amount | Value | |||||||
Oregon 0.4% |
| |||||||
Oregon State Housing & Community Services Department, Single Family Mortgage Program, Revenue Bonds | $ | 10,675,000 | $ | 11,386,916 | ||||
|
| |||||||
Pennsylvania 1.9% |
| |||||||
Commonwealth Financing Authority PA, Tobacco Master Settlement Payment, Revenue Bonds | 7,250,000 | 7,139,728 | ||||||
County of Lancaster PA, Unlimited General Obligation | ||||||||
Series A, Insured: BAM | 500,000 | 518,905 | ||||||
Series A, Insured: BAM | 420,000 | 434,028 | ||||||
Insured: AGM | 1,390,000 | 1,569,435 | ||||||
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds | 4,270,000 | 4,938,938 | ||||||
Philadelphia Gas Works Co., 1998 General Ordinance, Revenue Bonds | 2,300,000 | 2,548,354 | ||||||
State Public School Building Authority, Philadelphia Community College, Revenue Bonds | 5,505,000 | 6,046,912 | ||||||
State Public School Building Authority, Philadelphia School District, Revenue Bonds | 30,000,000 | 32,855,100 | ||||||
|
| |||||||
56,051,400 | ||||||||
|
| |||||||
Puerto Rico 7.7% |
| |||||||
Commonwealth of Puerto Rico, Aqueduct & Sewer Authority, Revenue Bonds | 14,410,000 | 14,804,258 | ||||||
Commonwealth of Puerto Rico, Public Improvement, Unlimited General Obligation | ||||||||
Insured: NATL-RE | 25,000 | 24,372 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Puerto Rico (continued) |
| |||||||
Commonwealth of Puerto Rico, Public Improvement, Unlimited General Obligation (continued) | ||||||||
Series A, Insured: AGM | $ | 715,000 | $ | 733,354 | ||||
Series A, Insured: AGC | 575,000 | 603,600 | ||||||
Series A, Insured: AGC | 525,000 | 550,169 | ||||||
Series A-4, Insured: AGM | 5,170,000 | 5,328,099 | ||||||
Series A, Insured: AGM | 28,270,000 | 29,894,394 | ||||||
Insured: AGM | 1,430,000 | 1,484,383 | ||||||
Series A, Insured: NATL-RE | 440,000 | 445,711 | ||||||
Series A, Insured: AGM | 1,955,000 | 2,083,541 | ||||||
Series C, Insured: AGM | 700,000 | 737,940 | ||||||
Series A, Insured: NATL-RE | 550,000 | 558,035 | ||||||
Series A, Insured: NATL-RE | 4,850,000 | 5,005,200 | ||||||
Series C, Insured: AGM | 1,150,000 | 1,204,981 | ||||||
Series C-7, Insured: NATL-RE | 2,240,000 | 2,319,072 | ||||||
Commonwealth of Puerto Rico, Unrefunded, Unlimited General Obligation | ||||||||
Series A, Insured: AGC | 285,000 | 295,876 | ||||||
Insured: AGC | 500,000 | 523,200 | ||||||
Puerto Rico Commonwealth, Aqueduct & Sewer Authority, Revenue Bonds | ||||||||
Series A, Insured: AGC | 4,350,000 | 4,554,667 | ||||||
Series A, Insured: AGC | 770,000 | 825,964 | ||||||
Puerto Rico Convention Center District Authority, Revenue Bonds | 4,760,000 | 4,736,248 | ||||||
Puerto Rico Electric Power Authority, Revenue Bonds | ||||||||
Series DDD, Insured: AGM | 3,115,000 | 3,072,138 |
Principal Amount | Value | |||||||
Puerto Rico (continued) |
| |||||||
Puerto Rico Electric Power Authority, Revenue Bonds (continued) | ||||||||
Series UU, Insured: AGC | $ | 2,345,000 | $ | 2,345,188 | ||||
Series NN, Insured: NATL-RE | 1,140,000 | 1,140,057 | ||||||
Series MM, Insured: NATL-RE | 2,600,000 | 2,629,536 | ||||||
Series RR, Insured: NATL-RE | 1,200,000 | 1,210,164 | ||||||
Series RR, Insured: NATL-RE | 1,450,000 | 1,460,005 | ||||||
Series UU, Insured: AGM | 2,280,000 | 2,394,433 | ||||||
Series SS, Insured: NATL-RE | 825,000 | 828,919 | ||||||
Series PP, Insured: NATL-RE | 1,105,000 | 1,110,249 | ||||||
Series UU, Insured: AGM | 4,415,000 | 4,638,576 | ||||||
Series PP, Insured: NATL-RE | 2,915,000 | 2,927,651 | ||||||
Series UU, Insured: AGC | 580,000 | 608,849 | ||||||
Series TT, Insured: AGM | 500,000 | 523,970 | ||||||
Series RR, Insured: AGC | 1,220,000 | 1,277,401 | ||||||
Series SS, Insured: AGM | 550,000 | 573,908 | ||||||
Series VV, Insured: NATL-RE | 1,875,000 | 2,003,625 | ||||||
Series VV, Insured: NATL-RE | 1,470,000 | 1,568,740 | ||||||
Series VV, Insured: NATL-RE | 2,000,000 | 2,125,260 | ||||||
Series VV, Insured: NATL-RE | 550,000 | 580,893 | ||||||
Series VV, Insured: NATL-RE | 620,000 | 652,575 | ||||||
Puerto Rico Highway & Transportation Authority, Revenue Bonds | ||||||||
Series L, Insured: NATL-RE | 2,195,000 | 2,330,190 | ||||||
Series N, Insured: NATL-RE | 5,525,000 | 5,871,031 | ||||||
Series CC, Insured: AGM | 2,165,000 | 2,409,710 | ||||||
Series N, Insured: NATL-RE | 5,030,000 | 5,333,108 |
26 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Puerto Rico (continued) |
| |||||||
Puerto Rico Highway & Transportation Authority, Revenue Bonds (continued) | ||||||||
Series N, Insured: AGC | $ | 5,000,000 | $ | 5,561,550 | ||||
Series CC, Insured: AGM | 2,310,000 | 2,562,021 | ||||||
Series N, Insured: AGC | 17,965,000 | 19,924,981 | ||||||
Series N, Insured: AGC, AGM | 1,265,000 | 1,403,011 | ||||||
Series N, Insured: AGC | 135,000 | 149,730 | ||||||
Series L, Insured: AGC | 2,535,000 | 2,816,106 | ||||||
Series E, Insured: AGM | 670,000 | 710,957 | ||||||
Series N, Insured: AGM | 625,000 | 698,781 | ||||||
Series N, Insured: AGC, AGM | 10,325,000 | 11,674,271 | ||||||
Series CC, Insured: AGC | 1,780,000 | 2,022,525 | ||||||
Puerto Rico Highway & Transportation Authority, Unrefunded, Revenue Bonds | ||||||||
Series D, Insured: AGM | 2,240,000 | 2,347,386 | ||||||
Series J, Insured: NATL-RE | 650,000 | 650,650 | ||||||
Puerto Rico Municipal Finance Agency, Revenue Bonds | ||||||||
Series A, Insured: AGM | 820,000 | 822,198 | ||||||
Series A, Insured: AGM | 195,000 | 201,841 | ||||||
Series A, Insured: AGM | 290,000 | 303,903 | ||||||
Series A, Insured: AGM | 1,720,000 | 1,794,768 | ||||||
Series C, Insured: AGM | 1,195,000 | 1,217,430 | ||||||
Series C, Insured: AGC | 210,000 | 218,375 | ||||||
Series C, Insured: AGC | 340,000 | 367,407 | ||||||
Puerto Rico Public Buildings Authority, Government Facilities, Revenue Bonds | ||||||||
Series F, Insured: NATL-RE, XLCA | 265,000 | 280,187 | ||||||
Series K, Insured: AGM | 1,150,000 | 1,163,259 |
Principal Amount | Value | |||||||
Puerto Rico (continued) |
| |||||||
Puerto Rico Public Buildings Authority, Government Facilities, Revenue Bonds (continued) | ||||||||
Series M-3, Insured: NATL-RE | $ | 300,000 | $ | 311,382 | ||||
Series M-3, Insured: NATL-RE | 7,465,000 | 7,728,514 | ||||||
Puerto Rico Sales Tax Financing Corp., Revenue Bonds | ||||||||
Series A, Insured: NATL-RE | 25,000,000 | 7,418,750 | ||||||
Series A, Insured: NATL-RE | 59,580,000 | 15,167,876 | ||||||
Series A, Insured: AMBAC, BHAC | 950,000 | 165,025 | ||||||
Series A, Insured: AGM | 7,305,000 | 7,456,360 | ||||||
Series C, Insured: AGM | 6,595,000 | 6,798,851 | ||||||
|
| |||||||
228,267,335 | ||||||||
|
| |||||||
Rhode Island 0.9% |
| |||||||
Providence Public Buildings Authority, Revenue Bonds | 1,565,000 | 1,686,491 | ||||||
Rhode Island Health & Educational Building Corp., Hospital Financing-Lifespan Obligated Group, Revenue Bonds | 5,000,000 | 5,605,500 | ||||||
Rhode Island Health & Educational Building Corp., Rhode Island School of Design, Revenue Bonds | ||||||||
5.00%, due 8/15/29 | 500,000 | 576,900 | ||||||
5.00%, due 8/15/31 | 400,000 | 456,816 | ||||||
5.00%, due 8/15/33 | 450,000 | 509,089 | ||||||
Rhode Island Housing & Mortgage Finance Corp., Homeownership Opportunity, Revenue Bonds | 5,700,000 | 5,951,598 | ||||||
Tobacco Settlement Financing Corp., Revenue Bonds | 12,000,000 | 12,645,240 | ||||||
|
| |||||||
27,431,634 | ||||||||
|
| |||||||
South Carolina 4.8% |
| |||||||
Patriots Energy Group Financing Agency, Gas Supply, Revenue Bonds | 30,000,000 | 31,415,700 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
South Carolina (continued) |
| |||||||
Piedmont Municipal Power Agency, Revenue Bonds | $ | 10,345,000 | $ | 11,164,220 | ||||
South Carolina Jobs-Economic Development Authority, Palmetto Health, Revenue Bonds | 420,000 | 429,475 | ||||||
South Carolina Public Service Authority, Revenue Bonds | ||||||||
Series C | 5,000,000 | 5,384,750 | ||||||
Series A | 10,000,000 | 10,742,800 | ||||||
Series C | 5,165,000 | 5,376,094 | ||||||
Series A | 4,050,000 | 4,197,339 | ||||||
Series A | 33,900,000 | 35,147,859 | ||||||
Series B | 2,500,000 | 2,599,275 | ||||||
South Carolina Public Service Authority, Santee Cooper Project, Revenue Bonds | ||||||||
Series A | 6,445,000 | 6,794,190 | ||||||
Series D | 2,595,000 | 2,747,275 | ||||||
Series C | 3,310,000 | 3,403,011 | ||||||
South Carolina State Housing Finance & Development Authority, Revenue Bonds | 4,000,000 | 4,259,480 | ||||||
South Carolina Transportation Infrastructure Bank, Revenue Bonds | 15,000,000 | 16,528,650 | ||||||
Sumter Two School Facilities Inc., Sumter School District Project, Revenue Bonds Insured: BAM | 1,100,000 | 1,214,994 | ||||||
|
| |||||||
141,405,112 | ||||||||
|
| |||||||
South Dakota 0.1% |
| |||||||
Harrisburg School District No. 41-2, Unlimited General Obligation | 1,370,000 | 1,417,018 | ||||||
|
|
Principal Amount | Value | |||||||
Tennessee 0.6% |
| |||||||
Johnson City Health & Educational Facilities Board, Mountain States Health Alliance, Revenue Bonds | $ | 3,605,000 | $ | 3,829,303 | ||||
Tennessee Housing & Development Agency, Residential Finance Program, Revenue Bonds | ||||||||
Issue 3 | 4,000,000 | 4,220,040 | ||||||
4.50%, due 7/1/49 | 8,250,000 | 8,842,845 | ||||||
|
| |||||||
16,892,188 | ||||||||
|
| |||||||
Texas 4.8% |
| |||||||
Bexar County Hospital District, Limited General Obligation | 4,200,000 | 4,229,316 | ||||||
Central Texas Turnpike System, Revenue Bonds | ||||||||
Series C | 5,000,000 | 5,324,800 | ||||||
Series B | 1,445,000 | 1,565,441 | ||||||
City of Donna TX, Tax & Toll Bridge, Limited General Obligation Insured: BAM | 1,035,000 | 1,133,325 | ||||||
City of Houston TX, Airport System Revenue, Revenue Bonds | 5,000,000 | 5,651,850 | ||||||
City of Houston, Limited General Obligation | 5,000,000 | 5,704,400 | ||||||
Harris County Cultural Education Facilities Finance Corp., Memorial Hermann Health System, Revenue Bonds | 4,280,000 | 4,621,458 | ||||||
Harris County-Houston Sports Authority Cap Appreciation, Senior Lien, Revenue Bonds | 17,115,000 | 5,588,390 | ||||||
North Harris County Regional Water Authority, Senior Lien, Revenue Bonds Insured: BAM | 3,215,000 | 3,489,593 | ||||||
North Texas Tollway Authority, Revenue Bonds | ||||||||
Series A | 1,400,000 | 1,525,188 |
28 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Texas (continued) |
| |||||||
North Texas Tollway Authority, Revenue Bonds (continued) | ||||||||
Series A | $ | 2,950,000 | $ | 3,205,234 | ||||
Series A, Insured: BAM | 9,500,000 | 10,332,865 | ||||||
Series B | 22,140,000 | 23,690,021 | ||||||
Tarrant County Cultural Education Facilities Finance Corp., Buckner Retirement Services, Revenue Bonds | ||||||||
Series A | 1,245,000 | 1,349,057 | ||||||
Series A | 1,305,000 | 1,425,504 | ||||||
Series A | 1,370,000 | 1,507,027 | ||||||
Series A | 1,440,000 | 1,591,214 | ||||||
Texas Department of Housing & Community Affairs, Revenue Bonds | 5,000,000 | 5,387,150 | ||||||
Texas Municipal Gas Acquisition & Supply Corp. III, Revenue Bonds | ||||||||
5.00%, due 12/15/30 | 17,100,000 | 18,217,314 | ||||||
5.00%, due 12/15/31 | 4,575,000 | 4,864,872 | ||||||
Texas Private Activity Bond Surface Transportation Corp., Senior Lien, LBJ Infrastructure, Revenue Bonds | ||||||||
7.00%, due 6/30/40 | 5,005,000 | 5,330,976 | ||||||
7.50%, due 6/30/32 | 4,095,000 | 4,404,336 | ||||||
7.50%, due 6/30/33 | 5,500,000 | 5,914,535 | ||||||
Texas Public Finance Authority, Financing System-Texas Southern University, Revenue Bonds | ||||||||
Insured: BAM | 1,000,000 | 1,007,740 | ||||||
Insured: BAM | 1,295,000 | 1,300,841 | ||||||
Texas State Municipal Power Agency, Revenue Bonds | ||||||||
5.00%, due 9/1/42 | 2,500,000 | 2,601,025 | ||||||
5.00%, due 9/1/47 | 2,750,000 | 2,858,625 | ||||||
Texas Water Development Board, Water Implementation Fund, Revenue Bonds | 5,000,000 | 5,836,150 |
Principal Amount | Value | |||||||
Texas (continued) |
| |||||||
Town of Prosper TX, Unlimited General Obligation | $ | 1,235,000 | $ | 1,299,566 | ||||
Viridian Municipal Management District, Unlimited General Obligation Insured: BAM | 500,000 | 588,265 | ||||||
|
| |||||||
141,546,078 | ||||||||
|
| |||||||
U.S. Virgin Islands 2.1% |
| |||||||
Virgin Islands Public Finance Authority, Matching Fund Loan, Revenue Bonds | ||||||||
Series A | 5,100,000 | 5,131,875 | ||||||
Series A | 6,960,000 | 7,053,960 | ||||||
Series A | 5,000,000 | 5,067,500 | ||||||
Virgin Islands Public Finance Authority, Revenue Bonds | ||||||||
5.00%, due 9/1/30 (d) | 5,000,000 | 5,195,950 | ||||||
Series C | 18,500,000 | 17,945,000 | ||||||
Series A, Insured: AGM | 15,655,000 | 16,594,770 | ||||||
Series C, Insured: AGM | 5,920,000 | 6,184,446 | ||||||
|
| |||||||
63,173,501 | ||||||||
|
| |||||||
Utah 0.3% |
| |||||||
City of Herriman UT, Special Assessment, Towne Centre Assessment Area | 55,000 | 57,380 | ||||||
Utah Housing Corp., Revenue Bonds | 4,250,000 | 4,394,755 | ||||||
Utah Infrastructure Agency, Revenue Bonds | ||||||||
5.00%, due 10/15/31 | 350,000 | 395,997 | ||||||
5.00%, due 10/15/38 | 1,990,000 | 2,189,796 | ||||||
5.00%, due 10/15/41 | 2,175,000 | 2,380,146 | ||||||
|
| |||||||
9,418,074 | ||||||||
|
| |||||||
Virginia 1.4% |
| |||||||
Chesapeake Bay Bridge & Tunnel | 11,575,000 | 12,757,270 | ||||||
|
| |||||||
Hampton Roads Sanitation District, Revenue Bonds | ||||||||
Series A | 3,540,000 | 4,087,072 | ||||||
Series A | 2,500,000 | 2,875,825 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Municipal Bonds (continued) | ||||||||
Virginia (continued) |
| |||||||
Virginia Commonwealth Transportation Board, Revenue Bonds | ||||||||
Series A | $ | 4,000,000 | $ | 4,691,240 | ||||
Series A | 3,750,000 | 4,372,013 | ||||||
Series A | 8,000,000 | 9,278,720 | ||||||
Virginia Resources Authority, Infrastructure Revenue, | 2,315,000 | 2,536,638 | ||||||
|
| |||||||
40,598,778 | ||||||||
|
| |||||||
Washington 0.6% |
| |||||||
Washington State Housing Finance Commission, Single Family Program, Revenue Bonds | 6,000,000 | 6,279,900 | ||||||
Washington State, Unlimited General Obligation | 11,335,000 | 12,601,460 | ||||||
|
| |||||||
18,881,360 | ||||||||
|
| |||||||
Wisconsin 0.5% |
| |||||||
Wisconsin Center District, Junior Dedicated, Revenue Bonds | ||||||||
Series A | 3,665,000 | 3,927,817 | ||||||
Series A | 2,850,000 | 3,048,702 | ||||||
Wisconsin Housing & Economic Development Authority, Revenue Bonds | 8,200,000 | 8,560,718 | ||||||
|
| |||||||
15,537,237 | ||||||||
|
|
Principal Amount | Value | |||||||
Wyoming 0.2% |
| |||||||
West Park Hospital District, Revenue Bonds | ||||||||
Series A | $ | 250,000 | $ | 260,658 | ||||
Series A | 1,000,000 | 1,063,960 | ||||||
Wyoming Community Development Authority, Revenue Bonds | 4,500,000 | 4,696,290 | ||||||
|
| |||||||
6,020,908 | ||||||||
|
| |||||||
Total Municipal Bonds | 98.8 | % | 2,928,384,765 | |||||
Other Assets, Less Liabilities | 1.2 | 36,286,242 | ||||||
Net Assets | 100.0 | % | $ | 2,964,671,007 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | Interest on these securities was subject to alternative minimum tax. |
(b) | Variable-rate demand notes (VRDNs) - Provide the right to sell the security at face value on either that day or within the rate-reset period. VRDNs will normally trade as if the maturity is the earlier put date, even though stated maturity is longer. The interest rate is reset on the put date at a stipulated daily, weekly, monthly, quarterly, or other specified time interval to reflect current market conditions. These securities do not indicate a reference rate and spread in their description. The maturity date shown is the final maturity. |
(c) | Floating rate - Rate shown was the rate in effect as of October 31, 2018. |
(d) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
As of October 31, 2018, the Fund held the following futures contracts1:
Type | Number of Contracts | Expiration Date | Value at Trade Date | Current Notional Amount | Unrealized Appreciation | |||||||||||||||
10-Year United States Treasury Note | (3,226 | ) | December 2018 | $ | (387,977,858 | ) | $ | (382,079,375 | ) | $ | 5,898,483 | |||||||||
United States Treasury Long Bond | (1,014 | ) | December 2018 | (146,502,343 | ) | (140,058,750 | ) | 6,443,593 | ||||||||||||
|
|
|
|
|
| |||||||||||||||
$ | (534,480,201 | ) | $ | (522,138,125 | ) | $ | 12,342,076 | |||||||||||||
|
|
|
|
|
|
1. | As of October 31, 2018, cash in the amount of $5,719,500 was on deposit with a broker or futures commission merchant for futures transactions. |
2. | Represents the difference between the value of the contracts at the time they were opened and the value as of October 31, 2018. |
30 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The following abbreviations are used in the preceding pages:
AGC—Assured Guaranty Corp.
AGM—Assured Guaranty Municipal Corp.
AMBAC—Ambac Assurance Corp.
BAM—Build America Mutual Assurance Co.
BHAC—Berkshire Hathaway Assurance Corp.
FHLMC—Federal Home Loan Mortgage Corp.
FNMA—Federal National Mortgage Association
GNMA—Government National Mortgage Association
NATL-RE—National Public Finance Guarantee Corp.
Q-SBLF—Qualified School Board Loan Fund
XLCA—XL Capital Assurance, Inc.
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets and liabilities:
Asset Valuation Inputs
Description | Quoted Active Assets | Significant Other Inputs (Level 2) | Significant Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Municipal Bonds | $ | — | $ | 2,928,384,765 | $ | — | $ | 2,928,384,765 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | — | 2,928,384,765 | — | 2,928,384,765 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Futures Contracts (b) | 12,342,076 | — | — | 12,342,076 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 12,342,076 | $ | 2,928,384,765 | $ | — | $ | 2,940,726,841 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The value listed for these securities reflects unrealized appreciation (depreciation) as shown on the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 31 |
Statement of Assets and Liabilities as of October 31, 2018
Assets |
| |||
Investment in securities, at value | $ | 2,928,384,765 | ||
Cash collateral on deposit at broker for futures contracts | 5,719,500 | |||
Cash | 1,831,109 | |||
Receivables: | ||||
Interest | 36,295,044 | |||
Investment securities sold | 26,403,587 | |||
Fund shares sold | 11,816,269 | |||
Variation margin on futures contracts | 1,901,124 | |||
Other assets | 70,317 | |||
|
| |||
Total assets | 3,012,421,715 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 32,951,220 | |||
Fund shares redeemed | 10,335,915 | |||
Manager (See Note 3) | 1,081,604 | |||
Transfer agent (See Note 3) | 470,859 | |||
NYLIFE Distributors (See Note 3) | 409,891 | |||
Shareholder communication | 53,575 | |||
Professional fees | 40,856 | |||
Custodian | 9,300 | |||
Trustees | 7,448 | |||
Accrued expenses | 11,626 | |||
Dividend payable | 2,378,414 | |||
|
| |||
Total liabilities | 47,750,708 | |||
|
| |||
Net assets | $ | 2,964,671,007 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 3,025,479 | ||
Additional paid-in capital | 3,021,997,486 | |||
|
| |||
3,025,022,965 | ||||
Total distributable earnings (loss) | (60,351,958 | ) | ||
|
| |||
Net assets | $ | 2,964,671,007 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 1,405,802,603 | ||
|
| |||
Shares of beneficial interest outstanding | 143,481,918 | |||
|
| |||
Net asset value per share outstanding | $ | 9.80 | ||
Maximum sales charge (4.50% of offering price) | 0.46 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.26 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 9,690,408 | ||
|
| |||
Shares of beneficial interest outstanding | 984,860 | |||
|
| |||
Net asset value per share outstanding | $ | 9.84 | ||
Maximum sales charge (4.50% of offering price) | 0.46 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.30 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 14,703,983 | ||
|
| |||
Shares of beneficial interest outstanding | 1,501,162 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.80 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 213,883,485 | ||
|
| |||
Shares of beneficial interest outstanding | 21,823,765 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.80 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 1,320,590,528 | ||
|
| |||
Shares of beneficial interest outstanding | 134,756,202 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.80 | ||
|
|
32 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) |
| |||
Income | ||||
Interest | $ | 117,437,183 | ||
Other | 9,255 | |||
|
| |||
Total income | 117,446,438 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 12,600,035 | |||
Distribution/Service—Class A (See Note 3) | 3,882,233 | |||
Distribution/Service—Investor Class (See Note 3) | 24,796 | |||
Distribution/Service—Class B (See Note 3) | 80,144 | |||
Distribution/Service—Class C (See Note 3) | 1,142,889 | |||
Transfer agent (See Note 3) | 2,839,399 | |||
Professional fees | 209,427 | |||
Registration | 205,375 | |||
Shareholder communication | 145,832 | |||
Trustees | 65,967 | |||
Custodian | 14,300 | |||
Miscellaneous | 105,375 | |||
|
| |||
Total expenses | 21,315,772 | |||
|
| |||
Net investment income (loss) | 96,130,666 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts |
| |||
Net realized gain (loss) on: | ||||
Investment transactions | (8,149,860 | ) | ||
Futures transactions | 18,281,965 | |||
|
| |||
Net realized gain (loss) on investments and futures transactions | 10,132,105 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (84,643,811 | ) | ||
Futures contracts | 7,245,257 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | (77,398,554 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments and futures transactions | (67,266,449 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 28,864,217 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 33 |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 96,130,666 | $ | 78,832,051 | ||||
Net realized gain (loss) on investments and futures transactions | 10,132,105 | (3,302,731 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and futures contracts | (77,398,554 | ) | (33,704,651 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 28,864,217 | 41,824,669 | ||||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (48,970,403 | ) | ||||||
Investor Class | (314,661 | ) | ||||||
Class B | (468,606 | ) | ||||||
Class C | (6,678,082 | ) | ||||||
Class I | (39,698,956 | ) | ||||||
|
| |||||||
(96,130,708 | ) | |||||||
|
| |||||||
Dividends to shareholders from net investment income: | ||||||||
Class A | (40,986,410 | ) | ||||||
Investor Class | (477,109 | ) | ||||||
Class B | (529,314 | ) | ||||||
Class C | (7,154,854 | ) | ||||||
Class I | (29,684,366 | ) | ||||||
|
| |||||||
(78,832,053 | ) | |||||||
|
| |||||||
Total dividends and distributions | (96,130,708 | ) | (78,832,053 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 908,337,837 | 1,493,056,476 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 70,847,755 | 57,536,646 | ||||||
Cost of shares redeemed | (800,275,249 | ) | (1,116,800,081 | ) | ||||
|
| |||||||
Increase (decrease) in net | 178,910,343 | 433,793,041 | ||||||
|
| |||||||
Net increase (decrease) in net assets | 111,643,852 | 396,785,657 | ||||||
Net Assets | ||||||||
Beginning of year | 2,853,027,155 | 2,456,241,498 | ||||||
|
| |||||||
End of year(2) | $ | 2,964,671,007 | $ | 2,853,027,155 | ||||
|
|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $(590,357) in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
34 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.33 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) | 0.31 | 0.31 | 0.32 | 0.35 | 0.39 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.22 | ) | (0.16 | ) | 0.25 | (0.10 | ) | 0.70 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.09 | 0.15 | 0.57 | 0.25 | 1.09 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.31 | ) | (0.31 | ) | (0.32 | ) | (0.35 | ) | (0.39 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.80 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (a) | 0.94 | % | 1.50 | % | 5.73 | % | 2.58 | % | 11.86 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 3.15 | % | 3.05 | % | 3.04 | % | 3.51 | % | 3.99 | % | ||||||||||
Net expenses | 0.80 | % | 0.81 | % | 0.80 | % | 0.81 | % | 0.78 | % | ||||||||||
Expenses (before waiver/reimbursement) | 0.80 | % | 0.81 | % | 0.80 | % | 0.82 | % | 0.83 | % | ||||||||||
Portfolio turnover rate | 40 | % | 62 | % | 47 | % | 46 | % | 68 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 1,405,803 | $ | 1,564,955 | $ | 1,248,065 | $ | 761,278 | $ | 427,586 |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.06 | $ | 10.23 | $ | 9.97 | $ | 10.08 | $ | 9.38 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) | 0.32 | 0.31 | 0.32 | 0.35 | 0.39 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.22 | ) | (0.17 | ) | 0.26 | (0.11 | ) | 0.69 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.10 | 0.14 | 0.58 | 0.24 | 1.08 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.32 | ) | (0.31 | ) | (0.32 | ) | (0.35 | ) | (0.38 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.84 | $ | 10.06 | $ | 10.23 | $ | 9.97 | $ | 10.08 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (a) | 0.97 | % | 1.43 | % | 5.83 | % | 2.47 | % | 11.76 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 3.17 | % | 3.10 | % | 3.11 | % | 3.54 | % | 3.94 | % | ||||||||||
Net expenses | 0.78 | % | 0.79 | % | 0.79 | % | 0.82 | % | 0.84 | % | ||||||||||
Expenses (before waiver/reimbursement) | 0.78 | % | 0.79 | % | 0.79 | % | 0.83 | % | 0.89 | % | ||||||||||
Portfolio turnover rate | 40 | % | 62 | % | 47 | % | 46 | % | 68 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 9,690 | $ | 10,216 | $ | 16,344 | $ | 17,259 | $ | 18,264 |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 35 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.01 | $ | 10.18 | $ | 9.92 | $ | 10.03 | $ | 9.33 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) | 0.29 | 0.28 | 0.29 | 0.33 | 0.35 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.21 | ) | (0.17 | ) | 0.26 | (0.11 | ) | 0.71 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.08 | 0.11 | 0.55 | 0.22 | 1.06 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.29 | ) | (0.28 | ) | (0.29 | ) | (0.33 | ) | (0.36 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.80 | $ | 10.01 | $ | 10.18 | $ | 9.92 | $ | 10.03 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (a) | 0.81 | % | 1.17 | % | 5.58 | % | 2.21 | % | 11.52 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.92 | % | 2.85 | % | 2.84 | % | 3.28 | % | 3.69 | % | ||||||||||
Net expenses | 1.03 | % | 1.04 | % | 1.04 | % | 1.07 | % | 1.09 | % | ||||||||||
Expenses (before waiver/reimbursement) | 1.03 | % | 1.04 | % | 1.04 | % | 1.08 | % | 1.14 | % | ||||||||||
Portfolio turnover rate | 40 | % | 62 | % | 47 | % | 46 | % | 68 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 14,704 | $ | 17,068 | $ | 19,318 | $ | 16,806 | $ | 12,439 |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.34 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) | 0.29 | 0.28 | 0.29 | 0.33 | 0.36 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.22 | ) | (0.16 | ) | 0.25 | (0.10 | ) | 0.69 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.07 | 0.12 | 0.54 | 0.23 | 1.05 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.29 | ) | (0.28 | ) | (0.29 | ) | (0.33 | ) | (0.36 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.80 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (a) | 0.71 | % | 1.27 | % | 5.48 | % | 2.31 | % | 11.40 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.92 | % | 2.85 | % | 2.81 | % | 3.28 | % | 3.68 | % | ||||||||||
Net expenses | 1.03 | % | 1.04 | % | 1.04 | % | 1.07 | % | 1.09 | % | ||||||||||
Expenses (before waiver/reimbursement) | 1.03 | % | 1.04 | % | 1.04 | % | 1.08 | % | 1.14 | % | ||||||||||
Portfolio turnover rate | 40 | % | 62 | % | 47 | % | 46 | % | 68 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 213,883 | $ | 241,526 | $ | 273,386 | $ | 183,509 | $ | 154,863 |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
36 | MainStay MacKay Tax Free Bond Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class I | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | $ | 9.34 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) | 0.34 | 0.33 | 0.34 | 0.38 | 0.41 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.22 | ) | (0.16 | ) | 0.25 | (0.10 | ) | 0.69 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.12 | 0.17 | 0.59 | 0.28 | 1.10 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.34 | ) | (0.33 | ) | (0.34 | ) | (0.38 | ) | (0.41 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.80 | $ | 10.02 | $ | 10.18 | $ | 9.93 | $ | 10.03 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (a) | 1.19 | % | 1.75 | % | 5.99 | % | 2.83 | % | 12.02 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 3.40 | % | 3.31 | % | 3.29 | % | 3.78 | % | 4.21 | % | ||||||||||
Net expenses | 0.55 | % | 0.56 | % | 0.55 | % | 0.56 | % | 0.53 | % | ||||||||||
Expenses (before waiver/reimbursement) | 0.55 | % | 0.56 | % | 0.55 | % | 0.57 | % | 0.58 | % | ||||||||||
Portfolio turnover rate | 40 | % | 62 | % | 47 | % | 46 | % | 68 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 1,320,591 | $ | 1,019,263 | $ | 899,128 | $ | 513,893 | $ | 314,005 |
(a) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 37 |
Note 1–Organization and Business
The MainStay Funds (the ‘‘Trust’’) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the ‘‘1940 Act’’), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the ‘‘Funds’’). These financial statements and notes relate to the MainStay MacKay Tax Free Bond Fund (formerly known as MainStay Tax Free Bond Fund) (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has seven classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Investor Class shares commenced operations on February 28, 2008. Class I shares commenced operations on December 21, 2009. Class R6 and Class T shares were registered for sale effective as of February 28, 2017. As of October 31, 2018, Class R6 and Class T shares were not yet offered for sale. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $250,000 or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class I shares
are offered at NAV without a sales charge. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class and Class T shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek current income exempt from regular federal income tax.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services – Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
38 | MainStay MacKay Tax Free Bond Fund |
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded.
39 |
Notes to Financial Statements (continued)
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Municipal debt securities are valued at the evaluated mean prices supplied by a pricing agent or broker selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values, at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Municipal debt securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is
“more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare dividends from net investment income, if any, daily and intends to pay them at least monthly and declares and pays distributions from net realized capital gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a specified future date and price, or to make or receive a cash payment
40 | MainStay MacKay Tax Free Bond Fund |
based on the value of a financial instrument (e.g., interest rate, security or securities index). The Fund is subject to risks such as market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission merchant an amount of cash and/or U.S. government securities equal to a certain percentage of the collateral amount, known as the “initial margin.” During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The Fund agrees to receive from or pay to the broker or futures commission merchant an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the Fund’s involvement in open futures positions. There are several risks associated with the use of futures contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. The Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAVs and may result in a loss to the Fund. As of October 31, 2018, open futures contracts are shown in the Portfolio of Investments.
(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on
securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. As of October 31, 2018, the Fund did not have any portfolio securities on loan.
(I) Municipal Bond Risk. The Fund may invest more heavily in municipal bonds from certain cities, states or regions than others, which may increase the Fund’s exposure to losses resulting from economic, political, or regulatory occurrences impacting these particular cities, states or regions. In addition, many state and municipal governments that issue securities are under significant economic and financial stress and may not be able to satisfy their obligations. The Fund may invest a substantial amount of its assets in municipal bonds whose interest is paid solely from revenues of similar projects, such as tobacco settlement bonds. If the Fund concentrates its investments in this manner, it assumes the legal and economic risks relating to such projects and this may have a significant impact on the Fund’s investment performance.
Certain of the issuers in which the Fund may invest have recently experienced, or may experience, significant financial difficulties and repeated credit rating downgrades. On May 3, 2017, the Commonwealth of Puerto Rico began proceedings to seek bankruptcy-type protections from approximately $74 billion in debt and approximately $48 billion in unfunded pension obligations. Puerto Rico’s debt restructuring of $122 billion is significantly larger than the previous largest U.S. public bankruptcy, which covered approximately $18 billion of debt for the city of Detroit. Puerto Rico’s debt restructuring process and other economic factors or developments could occur rapidly and may significantly affect the value of municipal securities of Puerto Rico. The Fund’s vulnerability to potential losses associated with such developments may be reduced through investing in municipal securities that feature credit enhancements (such as bond insurance). The bond insurance provider pays both principal and interest when due to the bond holder. The magnitude of Puerto Rico’s debt restructuring or other adverse economic developments could pose significant strains on the ability of municipal securities insurers to meet all future claims. As of October 31, 2018, 100% of the Puerto Rico municipal securities held by the Fund were insured.
(J) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(K) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to the Fund’s
41 |
Notes to Financial Statements (continued)
derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. The Fund entered into futures contracts to help manage the duration and yield curve positioning of the portfolio. These derivatives are not accounted for as hedging instruments.
Fair value of derivative instruments as of October 31, 2018:
Asset Derivatives
Statement of Assets and Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net Assets—Net unrealized appreciation on investments and futures contracts (a) | $ | 12,342,076 | $ | 12,342,076 | |||||
|
| |||||||||
Total Fair Value | $ | 12,342,076 | $ | 12,342,076 | ||||||
|
|
(a) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2018:
Realized Gain (Loss)
Statement of Operations Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | 18,281,965 | $ | 18,281,965 | |||||
|
| |||||||||
Total Realized Gain (Loss) | $ | 18,281,965 | $ | 18,281,965 | ||||||
|
|
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Interest Rate Contracts Risk | Total | ||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | 7,245,257 | $ | 7,245,257 | |||||
|
| |||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 7,245,257 | $ | 7,245,257 | ||||||
|
|
Average Notional Amount
Interest Rate Contracts Risk | Total | |||||
Futures Contracts Short | $(512,865,093) | $ | (512,865,093 | ) | ||
|
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (‘‘MacKay Shields” or the “Subadvisor’’), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.45% up to $500 million; 0.425% from $500 million to $1 billion; 0.40% from $1 billion to $5 billion; and 0.39% in excess of $5 billion, plus a fee for fund accounting services, previously provided by New York Life Investments under a separate fund accounting agreement, furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. Prior to February 28, 2018, the Fund paid the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.45% up to $500 million; 0.425% from $500 million to $1 billion; and 0.40% in excess of $1 billion, plus a fee for fund accounting services, previously provided by New York Life Investments under a separate fund accounting agreement, furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million.
During the year ended October 31, 2018, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.42% inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) for Class A shares do not exceed 0.82% of its average daily net assets. New York Life Investments will apply an equivalent waiver or reimbursement, in an equal number of basis points, to the other share classes of the Fund, except for Class R6. New York Life Investments has also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest,
42 | MainStay MacKay Tax Free Bond Fund |
litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. These agreements will remain in effect until February 28, 2019, and shall renew automatically for one year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval by the Board.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $12,600,035.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor and Class T Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class T shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class T shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 0.50%. Class I shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. During the year ended October 31, 2018, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $43,118 and $4,141, respectively.
During the year ended October 31, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $143,604, $43, $12,651 and $20,531, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New
York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 1,506,653 | ||
Investor Class | 7,886 | |||
Class B | 12,754 | |||
Class C | 181,772 | |||
Class I | 1,130,334 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
Note 4–Federal Income Tax
As of October 31, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments | $ | 2,981,792,791 | $ | 35,556,324 | $ | (88,964,350 | ) | $ | (53,408,026 | ) |
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary Income | Undistributed Tax Exempt Income | Accumulated Other Gain (Loss) | Other Temporary Differences | Unrealized Appreciation (Depreciation) | Total Gain (Loss) | |||||
$— | $1,788,015 | $(6,353,534) | $(2,378,414) | $(53,408,025) | $(60,351,958) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily due to mark to market of futures contracts. The other temporary differences are primarily due to dividends payable.
Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment
43 |
Notes to Financial Statements (continued)
capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards of $6,353,534 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||||||
2019 | $ | 2,136 | $ | — | ||||
Unlimited | 4,218 | — | ||||||
Total | $ | 6,354 | $ | — |
The Fund utilized $17,377,361 of capital loss carryforwards during the year ended October 31, 2018.
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: |
| |||||||
Ordinary Income | $ | 408,463 | $ | 360,676 | ||||
Exempt Interest Dividends | 95,722,245 | 78,471,377 | ||||||
Total | $ | 96,130,708 | $ | 78,832,053 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an
additional year on the same or different terms. Prior to July 31, 2018, the aggregate commitment amount and the commitment fee were the same as those under the current Credit Agreement. During the year ended October 31, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the year ended October 31, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2018, purchases and sales of securities, other than short-term securities, were $1,359,009 and $1,175,671, respectively.
44 | MainStay MacKay Tax Free Bond Fund |
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 27,829,562 | $ | 277,281,404 | |||||
Shares issued to shareholders in reinvestment of dividends | 4,415,082 | 43,848,053 | ||||||
Shares redeemed | (45,038,927 | ) | (446,306,716 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (12,794,283 | ) | (125,177,259 | ) | ||||
Shares converted into Class A (See Note 1) | 166,398 | 1,653,064 | ||||||
Shares converted from Class A (See Note 1) | (120,030 | ) | (1,185,433 | ) | ||||
|
| |||||||
Net increase (decrease) | (12,747,915 | ) | $ | (124,709,628 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 93,905,339 | $ | 927,816,118 | |||||
Shares issued to shareholders in reinvestment of dividends | 3,579,232 | 35,533,565 | ||||||
Shares redeemed | (62,891,318 | ) | (620,153,547 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 34,593,253 | 343,196,136 | ||||||
Shares converted into Class A (See Note 1) | 763,453 | 7,658,645 | ||||||
Shares converted from Class A (See Note 1) | (1,712,364 | ) | (16,828,308 | ) | ||||
|
| |||||||
Net increase (decrease) | 33,644,342 | $ | 334,026,473 | |||||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 140,459 | $ | 1,403,995 | |||||
Shares issued to shareholders in reinvestment of dividends | 29,038 | 289,625 | ||||||
Shares redeemed | (128,010 | ) | (1,278,335 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 41,487 | 415,285 | ||||||
Shares converted into Investor Class | 55,754 | 554,849 | ||||||
Shares converted from Investor Class | (127,835 | ) | (1,275,192 | ) | ||||
|
| |||||||
Net increase (decrease) | (30,594 | ) | $ | (305,058 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 196,152 | $ | 1,957,547 | |||||
Shares issued to shareholders in reinvestment of dividends | 42,322 | 421,396 | ||||||
Shares redeemed | (171,826 | ) | (1,712,187 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 66,648 | 666,756 | ||||||
Shares converted into Investor Class | 93,929 | 931,126 | ||||||
Shares converted from Investor Class | (743,260 | ) | (7,495,883 | ) | ||||
|
| |||||||
Net increase (decrease) | (582,683 | ) | $ | (5,898,001 | ) | |||
|
| |||||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 34,039 | $ | 341,621 | |||||
Shares issued to shareholders in reinvestment of dividends | 43,176 | 428,654 | ||||||
Shares redeemed | (227,067 | ) | (2,257,077 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (149,852 | ) | (1,486,802 | ) | ||||
Shares converted from Class B (See Note 1) | (53,311 | ) | (529,520 | ) | ||||
|
| |||||||
Net increase (decrease) | (203,163 | ) | $ | (2,016,322 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 165,734 | $ | 1,630,271 | |||||
Shares issued to shareholders in reinvestment of dividends | 48,735 | 483,079 | ||||||
Shares redeemed | (377,160 | ) | (3,748,282 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (162,691 | ) | (1,634,932 | ) | ||||
Shares converted from Class B (See Note 1) | (30,900 | ) | (304,987 | ) | ||||
|
| |||||||
Net increase (decrease) | (193,591 | ) | $ | (1,939,919 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 2,787,815 | $ | 27,771,578 | |||||
Shares issued to shareholders in reinvestment of dividends | 503,206 | 4,998,795 | ||||||
Shares redeemed | (5,571,996 | ) | (55,431,369 | ) | ||||
|
| |||||||
Net increase (decrease) | (2,280,975 | ) | $ | (22,660,996 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 4,227,857 | $ | 41,961,057 | |||||
Shares issued to shareholders in reinvestment of dividends | 534,813 | 5,304,569 | ||||||
Shares redeemed | (7,501,945 | ) | (74,279,922 | ) | ||||
|
| |||||||
Net increase (decrease) | (2,739,275 | ) | $ | (27,014,296 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 60,501,972 | $ | 601,539,239 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,142,891 | 21,282,628 | ||||||
Shares redeemed | (29,694,922 | ) | (295,001,752 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 32,949,941 | 327,820,115 | ||||||
Shares converted into Class I (See Note 1) | 79,237 | 782,232 | ||||||
|
| |||||||
Net increase (decrease) | 33,029,178 | $ | 328,602,347 | |||||
|
| |||||||
Year ended October 31, 2017 : | ||||||||
Shares sold | 52,446,921 | $ | 519,691,483 | |||||
Shares issued to shareholders in reinvestment of dividends | 1,590,436 | 15,794,037 | ||||||
Shares redeemed | (42,229,809 | ) | (416,906,143 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 11,807,548 | 118,579,377 | ||||||
Shares converted into Class I (See Note 1) | 1,632,319 | 16,039,407 | ||||||
|
| |||||||
Net increase (decrease) | 13,439,867 | $ | 134,618,784 | |||||
|
|
45 |
Notes to Financial Statements (continued)
Note 10–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
46 | MainStay MacKay Tax Free Bond Fund |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The MainStay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MainStay MacKay Tax Free Bond Fund (formerly, MainStay Tax Free Bond Fund) (the Fund), one of the funds constituting The MainStay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
47 |
Federal Income Tax Information
(Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders in a written statement as to the federal tax status of dividends paid by the Fund during such fiscal years.
For Federal individual income tax purposes, the Fund designated 99.6% of the ordinary income dividends paid during its fiscal year ended October 31, 2018 as attributable to interest income from Tax Exempt Municipal Bonds. Such dividends are currently exempt from Federal income taxes under Section 103(a) of the Internal Revenue Code.
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
48 | MainStay MacKay Tax Free Bond Fund |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
49 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
50 | MainStay MacKay Tax Free Bond Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
51 |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
* | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
52 | MainStay MacKay Tax Free Bond Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1716275 MS293-18 | MST11-12/18 (NYLIM) NL215 |
MainStay MacKay Convertible Fund (Formerly known as MainStay Convertible Fund)
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception Date | One Year | Five Years | Ten Years or Since Inception | Gross Expense Ratio3 | ||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | –2.40 3.28 | %
| | 5.51 6.71 | %
| | 10.68 11.31 | %
| | 0.99 0.99 | %
| |||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –2.55 3.12 |
| | 5.34 6.54 |
| | 10.47 11.10 |
| | 1.15 1.15 |
| |||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 5/1/1986 | | –2.46 2.35 |
| | 5.42 5.74 |
| | 10.27 10.27 |
| | 1.90 1.90 |
| |||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | 1.39 2.35 |
| | 5.73 5.73 |
| | 10.26 10.26 |
| | 1.90 1.90 |
| |||||||||
Class I Shares | No Sales Charge | 11/28/2008 | 3.65 | 7.03 | 12.37 | 0.74 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
ICE BofA Merrill Lynch U.S. Convertible Index4 | 3.67 | % | 7.51 | % | 12.52 | % | ||||||
Morningstar Convertibles Category Average5 | 2.28 | 5.30 | 10.35 |
4. | The ICE BofA Merrill Lynch U.S. Convertible Index is the Fund’s primary broad-based securities market index for comparison purposes. The ICE BofA Merrill Lynch U.S. Convertible Index is a market-capitalization weighted index of domestic corporate convertible securities. In order to be included in this Index, bonds and preferred stocks must be convertible only to common stock. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | The Morningstar Convertibles Category Average is representative of funds that are designed to offer some of the capital-appreciation potential of stock portfolios while also supplying some of the safety and yield of bond portfolios. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Convertible Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Convertible Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 10/31/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 994.70 | $ | 4.88 | $ | 1,020.32 | $ | 4.94 | 0.97% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 994.50 | $ | 5.63 | $ | 1,019.56 | $ | 5.70 | 1.12% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 990.10 | $ | 9.38 | $ | 1,015.78 | $ | 9.50 | 1.87% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 990.10 | $ | 9.38 | $ | 1,015.78 | $ | 9.50 | 1.87% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 997.00 | $ | 3.07 | $ | 1,022.13 | $ | 3.11 | 0.61% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of October 31, 2018 (Unaudited)
See Portfolio of Investments beginning on page 11 for specific holdings within these categories. The Fund’s portfolio is subject to change.
Top Ten Holdings or Issuers Held as of October 31, 2018 (excluding short-term investment) (Unaudited)
1. | Danaher Corp., (zero coupon), due 1/22/21 |
2. | NICE Systems, Inc., 1.25%, due 1/15/24 |
3. | Microchip Technology, Inc., 1.625%, due 2/15/25–2/15/27 |
4. | BioMarin Pharmaceutical, Inc., 0.599%, due 8/1/24 |
5. | Anthem, Inc., 2.75%, due 10/15/42 |
6. | Bank of America Corp. |
7. | DISH Network Corp., 3.375%, due 8/15/26 |
8. | Teladoc Health, Inc., 1.375%, due 5/15/25 |
9. | Liberty Media Corp., 1.00%–1.375%, due 1/30/23–10/15/23 |
10. | Weatherford International, Ltd., 5.875%, due 7/1/21 |
8 | MainStay MacKay Convertible Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio manager Edward Silverstein, CFA, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Convertible Fund perform relative to its benchmark and peer group during the 12 months ended October 31, 2018?
For the 12 months ended October 31, 2018, Class I shares of MainStay MacKay Convertible Fund returned 3.65%, underperforming the 3.67% return of the Fund’s primary benchmark, the ICE BofA Merrill Lynch U.S. Convertible Index. Over the same period, Class I shares outperformed the 2.28% return of the Morningstar Convertibles Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s relative performance was positively affected by owning several strong-performing positions that had relatively small weightings in the ICE BofA Merrill Lynch U.S. Convertible Index. Two prominent examples included the convertible bonds of internet retailer Etsy, which had a small benchmark weighting, and the common shares of shipping and logistics provider XPO Logistics, which was not in the benchmark at all. Etsy performed well after the company raised fees for merchants that sell craft-related items on the company’s website. XPO Logistics’ share price rose sharply at the end of 2017 after the company was rumored to be a takeout target. We received the shares of XPO Logistics after the company’s convertible bonds matured and were converted into common shares.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay Convertible Fund was renamed MainStay MacKay Convertible Fund. For more information on this change, please refer to the supplement dated December 15, 2017.
What was the Fund’s duration2 strategy during the reporting period?
Convertible bond prices tend to vary with changes in the price of the underlying equity security rather than with changes in interest rates. For this reason, duration does not guide our investment decisions regarding the Fund’s convertible security holdings. At the end of the reporting period, the effective duration of the Fund was 4.06 years.
During the reporting period, which sectors and securities were the strongest positive contributors to the Fund’s absolute performance and which sectors and securities were particularly weak?
The strongest contributions to absolute performance came from the internet, software and health care sectors. (Contributions take weightings and total returns into account.) In addition to
Etsy, described above, top-performing internet holdings included web-based dating firm IAC, which exceeded earnings estimates as daters increasingly looked for love online. In the software area, many companies continued to report solid revenue growth, motivating investors to bid up share prices despite high valuations. The Fund’s best performers included the convertible bonds of RedHat, Coupa Software, NICE, Workday and Okta. In health care, the convertible bonds of insurers Anthem, Inc. and Molina Healthcare stood out. Anthem reported several consecutive quarters of earnings that exceeded analyst estimates and raised forward earnings guidance. Molina rose sharply after the company’s board of directors ousted the incumbent management team and earnings increased sharply under the new CEO.
The weakest contributions to the Fund’s absolute performance came from the semiconductors, communications and industrials sectors. The convertible bonds of several of the Fund’s semiconductor holdings underperformed the ICE BofA Merrill Lynch U.S. Convertible Index. The convertible bonds of Microchip Technology, ON Semiconductor and Micron Technology fell during the period after indicating that demand and pricing for memory products were slowing. In the communications sector, the convertible bonds of DISH Network and Liberty Media Corporation declined as well. DISH, a notable underperformer, continued to lose subscribers for its satellite television service, and refrained from selling or activating wireless spectrum holdings that it acquired at FCC auctions in years past. Among industrials, gains in XPO Logistics, described above, were counterbalanced by the poor performance of the convertible bonds of Patrick Industries and the convertible preferred shares of Stanley Black & Decker. Patrick, a manufacturer of supplies to mobile home manufacturers, declined despite reporting several quarters of earnings that exceeded analyst estimates. Both Patrick and Stanley likely fell due to investor fears about an eventual slowing of the economy. All of the detractors remain holdings of the Fund at October 31, 2018.
What were some of the Fund’s largest purchases and sales during the reporting period?
Nearly all Fund purchases were new convertible bond offerings that came to market during the reporting period. Notable purchases included Caesar’s Entertainment, NRG Energy, Oil States International, Teladoc Health, Transocean and additional convertible preferred shares of Becton Dickinson. Most large Fund sales were the result of securities maturing or being called by the issuers. Notable sales included the convertible preferred shares of Allergan and the convertible bonds of Wabash National, Blackhawk Network Holdings, Carriage Services and Hologic.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on bench-mark and peer group returns. |
2. | Duration is the measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
9 |
How did the Fund’s sector weightings change during the reporting period?
During the period, the Fund experienced an increased weighting to the energy and health care sectors and a decreased weighting to the information technology and consumer discretionary sectors.
How was the Fund positioned at the end of the reporting period?
At the end of the reporting period the Fund was overweight relative to the ICE BofA Merrill Lynch U.S. Convertible Index in the energy, health care and industrials sectors; underweight in the financial, consumer discretionary, information technology, real estate and utilities sectors; and roughly market weighted to the communications, consumer staples, and materials sectors.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay MacKay Convertible Fund |
Portfolio of Investments October 31, 2018
Principal Amount | Value | |||||||
Convertible Securities 85.7%† Convertible Bonds 77.0% |
| |||||||
Advertising 0.7% |
| |||||||
Quotient Technology, Inc. | $ | 8,787,000 | $ | 8,987,528 | ||||
|
| |||||||
Aerospace & Defense 0.9% |
| |||||||
Aerojet Rocketdyne Holdings, Inc. | 7,946,000 | 11,694,677 | ||||||
|
| |||||||
Biotechnology 7.4% |
| |||||||
BioMarin Pharmaceutical, Inc. | 26,166,000 | 27,227,869 | ||||||
Exact Sciences Corp. | 4,021,000 | 4,706,581 | ||||||
Illumina, Inc. | 4,300,000 | 5,418,000 | ||||||
(zero coupon), due 8/15/23 (a) | 2,862,000 | 3,009,902 | ||||||
0.50%, due 6/15/21 | 9,998,000 | 13,518,826 | ||||||
Intercept Pharmaceuticals, Inc. | 6,684,000 | 6,280,119 | ||||||
Ionis Pharmaceuticals, Inc. | 14,497,000 | 15,162,528 | ||||||
Ligand Pharmaceuticals, Inc. | 13,375,000 | 12,810,441 | ||||||
Medicines Co. | 10,023,000 | 8,504,676 | ||||||
Novavax, Inc. | 4,500,000 | 2,733,750 | ||||||
Radius Health, Inc. | 660,000 | 515,804 | ||||||
|
| |||||||
99,888,496 | ||||||||
|
| |||||||
Building Materials 0.9% |
| |||||||
Patrick Industries, Inc. | 14,099,000 | 11,922,467 | ||||||
|
| |||||||
Commercial Services 1.5% |
| |||||||
Macquarie Infrastructure Corp. | 20,595,000 | 20,504,464 | ||||||
|
| |||||||
Computers 2.4% |
| |||||||
Lumentum Holdings, Inc. | 17,615,000 | 20,073,772 | ||||||
Nutanix, Inc. | 2,727,000 | 3,010,815 | ||||||
Pure Storage, Inc. | 3,879,000 | 3,975,871 | ||||||
Western Digital Corp. | 6,616,000 | 5,593,173 | ||||||
|
| |||||||
32,653,631 | ||||||||
|
|
Principal Amount | Value | |||||||
Diversified Financial Services 2.0% |
| |||||||
Air Lease Corp. | $ | 15,781,000 | $ | 20,647,987 | ||||
LendingTree, Inc. | 5,619,000 | 6,628,773 | ||||||
|
| |||||||
27,276,760 | ||||||||
|
| |||||||
Electric 0.4% |
| |||||||
NRG Energy, Inc. | 5,084,000 | 5,303,888 | ||||||
|
| |||||||
Entertainment 0.2% |
| |||||||
Live Nation Entertainment, Inc. | 2,074,000 | 2,220,530 | ||||||
|
| |||||||
Health Care—Products 3.7% |
| |||||||
Danaher Corp. | 8,558,000 | 32,552,655 | ||||||
NuVasive, Inc. | 7,139,000 | 7,991,539 | ||||||
Wright Medical Group N.V. | 9,180,000 | 9,334,821 | ||||||
|
| |||||||
49,879,015 | ||||||||
|
| |||||||
Health Care—Services 4.7% |
| |||||||
Anthem, Inc. | 7,160,000 | 27,205,673 | ||||||
Molina Healthcare, Inc. | 3,805,000 | 11,854,234 | ||||||
Teladoc Health, Inc. | 17,196,000 | 25,063,170 | ||||||
|
| |||||||
64,123,077 | ||||||||
|
| |||||||
Internet 12.3% |
| |||||||
Boingo Wireless, Inc. | 7,786,000 | 7,855,560 | ||||||
Booking Holdings, Inc. | 19,156,000 | 22,178,664 | ||||||
Etsy, Inc. | 15,601,000 | 20,749,330 | ||||||
FireEye, Inc. | 5,405,000 | 5,705,653 | ||||||
IAC FinanceCo, Inc. | 14,542,000 | 20,354,786 | ||||||
Liberty Expedia Holdings, Inc. | 11,074,000 | 11,039,671 | ||||||
MercadoLibre, Inc. | 10,118,000 | 9,773,877 | ||||||
Okta, Inc. | 6,056,000 | 8,268,505 | ||||||
Palo Alto Networks, Inc. | 13,659,000 | 13,337,645 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Convertible Bonds (continued) |
| |||||||
Internet (continued) |
| |||||||
RingCentral, Inc. | $ | 11,103,000 | $ | 12,599,684 | ||||
Twilio, Inc. | 3,269,000 | 4,085,305 | ||||||
Twitter, Inc. | 9,161,000 | 8,878,576 | ||||||
Wix.com, Ltd. | 11,351,000 | 11,248,841 | ||||||
Zendesk, Inc. | 2,074,000 | 2,281,605 | ||||||
Zillow Group, Inc. | 8,726,000 | 7,975,564 | ||||||
|
| |||||||
166,333,266 | ||||||||
|
| |||||||
Iron & Steel 0.3% |
| |||||||
Cleveland-Cliffs, Inc. | 2,878,000 | 4,115,454 | ||||||
|
| |||||||
Lodging 0.4% |
| |||||||
Caesars Entertainment Corp. | 3,741,000 | 5,351,792 | ||||||
|
| |||||||
Machinery—Diversified 1.5% |
| |||||||
Chart Industries, Inc. | 15,248,000 | 19,707,186 | ||||||
|
| |||||||
Media 3.6% |
| |||||||
DISH Network Corp. | 28,598,000 | 25,550,883 | ||||||
Liberty Media Corp-Liberty Formula One | 9,441,000 | 10,207,147 | ||||||
Liberty Media Corp. | 11,345,000 | 13,110,282 | ||||||
|
| |||||||
48,868,312 | ||||||||
|
| |||||||
Oil & Gas 3.7% |
| |||||||
Ensco Jersey Finance, Ltd. | 20,143,000 | 18,444,824 | ||||||
Oasis Petroleum, Inc. | 17,949,000 | 20,273,629 | ||||||
Transocean, Inc. | 9,294,000 | 11,596,960 | ||||||
|
| |||||||
50,315,413 | ||||||||
|
| |||||||
Oil & Gas Services 4.8% |
| |||||||
Helix Energy Solutions Group, Inc. | 16,411,000 | 16,928,587 | ||||||
Newpark Resources, Inc. | 6,326,000 | 7,252,759 |
Principal Amount | Value | |||||||
Oil & Gas Services (continued) |
| |||||||
Oil States International, Inc. | $ | 19,999,000 | $ | 18,295,865 | ||||
Weatherford International, Ltd. | 29,206,000 | 22,489,467 | ||||||
|
| |||||||
64,966,678 | ||||||||
|
| |||||||
Pharmaceuticals 2.9% |
| |||||||
Herbalife Nutrition, Ltd. | 9,443,000 | 10,003,678 | ||||||
Neurocrine Biosciences, Inc. | 8,164,000 | 12,600,620 | ||||||
Pacira Pharmaceuticals, Inc. | 8,745,000 | 9,184,104 | ||||||
Supernus Pharmaceuticals, Inc. | 6,269,000 | 6,807,012 | ||||||
|
| |||||||
38,595,414 | ||||||||
|
| |||||||
Semiconductors 9.0% |
| |||||||
Cypress Semiconductor Co. | 6,094,000 | 5,799,910 | ||||||
Inphi Corp. | 14,512,000 | 15,237,600 | ||||||
Intel Corp. | 5,613,000 | 12,751,697 | ||||||
Microchip Technology, Inc. | ||||||||
1.625%, due 2/15/25 | 17,553,000 | 22,906,191 | ||||||
1.625%, due 2/15/27 | 7,129,000 | 6,774,610 | ||||||
Micron Technology, Inc. | 12,588,000 | 16,433,584 | ||||||
Novellus Systems, Inc. | 1,076,000 | 4,616,794 | ||||||
ON Semiconductor Corp. | 12,331,000 | 13,849,932 | ||||||
Rambus, Inc. | 9,996,000 | 8,789,623 | ||||||
Silicon Laboratories, Inc. | 13,815,000 | 14,940,840 | ||||||
|
| |||||||
122,100,781 | ||||||||
|
| |||||||
Software 9.8% |
| |||||||
Atlassian, Inc. | 7,719,000 | 8,861,868 | ||||||
Citrix Systems, Inc. | 6,828,000 | 9,690,714 | ||||||
Coupa Software, Inc. | 3,586,000 | 5,549,335 | ||||||
NICE Systems, Inc. | 23,525,000 | 31,861,672 | ||||||
Nuance Communications, Inc. | 11,278,000 | 11,365,269 | ||||||
Red Hat, Inc. | 4,231,000 | 9,859,664 |
12 | MainStay MacKay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Convertible Bonds (continued) |
| |||||||
Software (continued) |
| |||||||
ServiceNow, Inc. | $ | 8,807,000 | $ | 12,473,213 | ||||
Splunk, Inc. | 8,000,000 | 7,696,480 | ||||||
Verint Systems, Inc. | 17,084,000 | 17,036,694 | ||||||
Workday, Inc. | 15,957,000 | 17,803,688 | ||||||
|
| |||||||
132,198,597 | ||||||||
|
| |||||||
Telecommunications 1.8% |
| |||||||
Finisar Corp. | 9,521,000 | 8,490,190 | ||||||
Viavi Solutions Inc. | 14,679,000 | 15,841,768 | ||||||
|
| |||||||
24,331,958 | ||||||||
|
| |||||||
Transportation 2.1% |
| |||||||
Atlas Air Worldwide Holdings, Inc. | 16,161,000 | 16,868,044 | ||||||
Echo Global Logistics, Inc. | 11,612,000 | 11,519,324 | ||||||
|
| |||||||
28,387,368 | ||||||||
|
| |||||||
Total Convertible Bonds |
| 1,039,726,752 | ||||||
|
| |||||||
Shares | ||||||||
Convertible Preferred Stocks 8.7% |
| |||||||
Banks 2.2% |
| |||||||
Bank of America Corp. | 12,072 | 15,347,134 | ||||||
Wells Fargo & Co. | 11,552 | 14,694,028 | ||||||
|
| |||||||
30,041,162 | ||||||||
|
| |||||||
Chemicals 0.4% |
| |||||||
A. Schulman, Inc. | 5,832 | 6,021,540 | ||||||
|
| |||||||
Food 0.9% |
| |||||||
Post Holdings, Inc. | 76,604 | 12,677,962 | ||||||
|
| |||||||
Hand & Machine Tools 0.9% |
| |||||||
Stanley Black & Decker, Inc. (b) | 131,861 | 12,098,247 | ||||||
|
|
Shares | Value | |||||||
Health Care—Products 1.4% |
| |||||||
Becton Dickinson & Co. | 314,669 | $ | 18,461,630 | |||||
|
| |||||||
Metal Fabricate & Hardware 0.5% |
| |||||||
Rexnord Corp. | 108,438 | 6,199,400 | ||||||
|
| |||||||
Oil & Gas 1.5% |
| |||||||
Hess Corp. | 317,155 | 20,136,171 | ||||||
|
| |||||||
Real Estate Investment Trusts 0.9% |
| |||||||
Crown Castle International Corp. | 8,856 | 9,254,520 | ||||||
Welltower, Inc. | 47,800 | 2,944,480 | ||||||
|
| |||||||
12,199,000 | ||||||||
|
| |||||||
Total Convertible Preferred Stocks | 117,835,112 | |||||||
|
| |||||||
Total Convertible Securities | 1,157,561,864 | |||||||
|
| |||||||
Common Stocks 4.0% |
| |||||||
Aerospace & Defense 0.5% |
| |||||||
United Technologies Corp. | 53,105 | �� | 6,596,172 | |||||
|
| |||||||
Air Freight & Logistics 0.8% |
| |||||||
XPO Logistics, Inc. (c) | 122,563 | 10,954,681 | ||||||
|
| |||||||
Airlines 0.9% |
| |||||||
Delta Air Lines, Inc. | 227,309 | 12,440,622 | ||||||
|
| |||||||
Banks 0.8% |
| |||||||
Bank of America Corp. | 398,621 | 10,962,077 | ||||||
|
| |||||||
Energy Equipment & Services 0.4% |
| |||||||
Baker Hughes, a GE Co. | 51,357 | 1,370,718 | ||||||
Halliburton Co. | 113,326 | 3,930,146 | ||||||
|
| |||||||
5,300,864 | ||||||||
|
| |||||||
Health Care Equipment & Supplies 0.6% |
| |||||||
Teleflex, Inc. | 33,226 | 7,998,827 | ||||||
|
| |||||||
Total Common Stocks | 54,253,243 | |||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments October 31, 2018 (continued)
Shares | Value | |||||||
Short-Term Investments 9.4% |
| |||||||
Affiliated Investment Companies 9.4% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.075% (d)(e) | 126,303,253 | $ | 126,303,253 | |||||
|
| |||||||
Total Short-Term Investment | 126,303,253 | |||||||
|
| |||||||
Total Investments | 99.1 | % | 1,338,118,360 | |||||
Other Assets, Less Liabilities | 0.9 | 12,460,961 | ||||||
Net Assets | 100.0 | % | $ | 1,350,579,321 |
† | Percentages indicated are based on Fund net assets. |
(a) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(b) | All or a portion of this security was held on loan. As of October 31, 2018, the market value of securities loaned was $51,336,767 and the Fund received non-cash collateral in the form of U.S. Treasury securities with a value of $51,881,049 (See Note 2(H)). |
(c) | Non-income producing security. |
(d) | Current yield as of October 31, 2018. |
(e) | As of October 31, 2018, the Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets:
Asset Valuation Inputs
Description | Quoted Active Assets (Level 1) | Significant Other Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Convertible Securities | ||||||||||||||||
Convertible Bonds | $ | — | $ | 1,039,726,752 | $ | — | $ | 1,039,726,752 | ||||||||
Convertible Preferred Stocks (b) | 99,135,610 | 18,699,502 | — | 117,835,112 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Convertible Securities | 99,135,610 | 1,058,426,254 | — | 1,157,561,864 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks | 54,253,243 | — | — | 54,253,243 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 126,303,253 | — | — | 126,303,253 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 279,692,106 | $ | 1,058,426,254 | $ | — | $ | 1,338,118,360 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 2 securities valued at $6,021,540 and $12,677,962 are held in Chemicals and Food, respectively, within the Convertible Preferred Stocks section of the Portfolio of Investments. |
14 | MainStay MacKay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2018
Assets |
| |||
Investment in securities, at value (identified cost $1,144,683,088) including securities on loan of $51,336,767 | $ | 1,211,815,107 | ||
Investment in affiliated investment companies, at value | 126,303,253 | |||
Receivables: | ||||
Fund shares sold | 8,933,517 | |||
Dividends and interest | 5,727,983 | |||
Securities lending income | 94,164 | |||
Other assets | 63,455 | |||
|
| |||
Total assets | 1,352,937,479 | |||
|
| |||
Liabilities |
| |||
Payables: | ||||
Fund shares redeemed | 1,180,875 | |||
Manager (See Note 3) | 595,949 | |||
Transfer agent (See Note 3) | 283,247 | |||
NYLIFE Distributors (See Note 3) | 207,961 | |||
Shareholder communication | 39,970 | |||
Professional fees | 21,835 | |||
Custodian | 4,219 | |||
Trustees | 3,419 | |||
Accrued expenses | 20,683 | |||
|
| |||
Total liabilities | 2,358,158 | |||
|
| |||
Net assets | $ | 1,350,579,321 | ||
|
| |||
Composition of Net Assets |
| |||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 790,682 | ||
Additional paid-in capital | 1,227,331,765 | |||
|
| |||
1,228,122,447 | ||||
Total distributable earnings (loss) | 122,456,874 | |||
|
| |||
Net assets | $ | 1,350,579,321 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 518,380,549 | ||
|
| |||
Shares of beneficial interest outstanding | 30,365,860 | |||
|
| |||
Net asset value per share outstanding | $ | 17.07 | ||
Maximum sales charge (5.50% of offering price) | 0.99 | |||
|
| |||
Maximum offering price per share outstanding | $ | 18.06 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 52,723,240 | ||
|
| |||
Shares of beneficial interest outstanding | 3,089,402 | |||
|
| |||
Net asset value per share outstanding | $ | 17.07 | ||
Maximum sales charge (5.50% of offering price) | 0.99 | |||
|
| |||
Maximum offering price per share outstanding | $ | 18.06 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 15,051,026 | ||
|
| |||
Shares of beneficial interest outstanding | 886,260 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 16.98 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 80,830,418 | ||
|
| |||
Shares of beneficial interest outstanding | 4,765,443 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 16.96 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 683,594,088 | ||
|
| |||
Shares of beneficial interest outstanding | 39,961,189 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 17.11 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) |
| |||
Income | ||||
Interest | $ | 13,738,405 | ||
Dividends—Unaffiliated | 7,620,612 | |||
Dividends—Affiliated | 724,145 | |||
Securities lending | 687,102 | |||
Other | 3,696 | |||
|
| |||
Total income | 22,773,960 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 7,050,614 | |||
Distribution/Service—Class A (See Note 3) | 1,268,730 | |||
Distribution/Service—Investor Class (See Note 3) | 138,355 | |||
Distribution/Service—Class B (See Note 3) | 174,670 | |||
Distribution/Service—Class C (See Note 3) | 824,466 | |||
Transfer agent (See Note 3) | 1,680,277 | |||
Professional fees | 130,401 | |||
Registration | 129,520 | |||
Shareholder communication | 124,889 | |||
Trustees | 27,812 | |||
Custodian | 7,173 | |||
Miscellaneous | 62,246 | |||
|
| |||
Total expenses before waiver/reimbursement | 11,619,153 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (701,850 | ) | ||
|
| |||
Net expenses | 10,917,303 | |||
|
| |||
Net investment income (loss) | 11,856,657 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments |
| |||
Net realized gain (loss) on investments | 67,397,976 | |||
Net change in unrealized appreciation (depreciation) on investments | (52,678,146 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments | 14,719,830 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 26,576,487 | ||
|
|
16 | MainStay MacKay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 11,856,657 | $ | 11,959,710 | ||||
Net realized gain (loss) on investments | 67,397,976 | 67,286,271 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (52,678,146 | ) | 66,696,846 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 26,576,487 | 145,942,827 | ||||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (33,491,767 | ) | ||||||
Investor Class | (3,812,652 | ) | ||||||
Class B | (1,145,593 | ) | ||||||
Class C | (4,937,399 | ) | ||||||
Class I | (37,074,520 | ) | ||||||
|
| |||||||
(80,461,931 | ) | |||||||
|
| |||||||
Dividends to shareholders from net investment income: | ||||||||
Class A | (5,915,050 | ) | ||||||
Investor Class | (959,734 | ) | ||||||
Class B | (111,244 | ) | ||||||
Class C | (412,759 | ) | ||||||
Class I | (6,945,027 | ) | ||||||
|
| |||||||
(14,343,814 | ) | |||||||
|
| |||||||
Distributions to shareholders from net realized gain on investments: | ||||||||
Class A | (6,089,507 | ) | ||||||
Investor Class | (1,306,245 | ) | ||||||
Class B | (339,058 | ) | ||||||
Class C | (1,228,067 | ) | ||||||
Class I | (4,515,780 | ) | ||||||
|
| |||||||
(13,478,657 | ) | |||||||
|
| |||||||
Total dividends and distributions to shareholders | (80,461,931 | ) | (27,822,471 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | $ | 527,717,872 | $ | 540,443,512 | ||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 70,639,748 | 23,898,379 | ||||||
Cost of shares redeemed | (396,673,712 | ) | (278,484,613 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 201,683,908 | 285,857,278 | ||||||
|
| |||||||
Net increase (decrease) in net assets | 147,798,464 | 403,977,634 |
2018 | 2017 | |||||||
Net Assets |
| |||||||
Beginning of year | 1,202,780,857 | 798,803,223 | ||||||
|
| |||||||
End of year(2) | $ | 1,350,579,321 | $ | 1,202,780,857 | ||||
|
|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $(8,121,831) in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 17.75 | $ | 15.72 | $ | 16.51 | $ | 18.33 | $ | 17.33 | ||||||||||
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Net investment income (loss) (a) | 0.15 | 0.19 | 0.20 | 0.11 | 0.15 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.40 | 2.34 | 0.35 | (0.00 | )‡ | 1.59 | ||||||||||||||
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Total from investment operations | 0.55 | 2.53 | 0.55 | 0.11 | 1.74 | |||||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.22 | ) | (0.24 | ) | (0.64 | ) | (0.47 | ) | (0.51 | ) | ||||||||||
From net realized gain on investments | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | ||||||||||
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Total dividends and distributions | (1.23 | ) | (0.50 | ) | (1.34 | ) | (1.93 | ) | (0.74 | ) | ||||||||||
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Net asset value at end of year | $ | 17.07 | $ | 17.75 | $ | 15.72 | $ | 16.51 | $ | 18.33 | ||||||||||
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Total investment return (b) | 3.28 | % | 16.30 | % | 3.71 | % | 0.58 | % | 10.42 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.87 | % | 1.12 | % | 1.31 | % | 0.62 | % | 0.86 | % | ||||||||||
Net expenses (c) | 0.98 | % | 0.98 | % | 1.01 | % | 0.99 | % | 0.97 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 0.98 | % | 0.99 | % | 1.01 | % | 0.99 | % | 0.97 | % | ||||||||||
Portfolio turnover rate | 43 | % | 38 | % | 24 | % | 60 | % | 59 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 518,381 | $ | 482,341 | $ | 368,583 | $ | 408,067 | $ | 384,987 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 17.75 | $ | 15.72 | $ | 16.50 | $ | 18.33 | $ | 17.32 | ||||||||||
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Net investment income (loss) (a) | 0.13 | 0.16 | 0.18 | 0.08 | 0.12 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.39 | 2.34 | 0.36 | (0.01 | ) | 1.60 | ||||||||||||||
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Total from investment operations | 0.52 | 2.50 | 0.54 | 0.07 | 1.72 | |||||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.19 | ) | (0.21 | ) | (0.62 | ) | (0.44 | ) | (0.48 | ) | ||||||||||
From net realized gain on investments | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | ||||||||||
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Total dividends and distributions | (1.20 | ) | (0.47 | ) | (1.32 | ) | (1.90 | ) | (0.71 | ) | ||||||||||
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Net asset value at end of year | $ | 17.07 | $ | 17.75 | $ | 15.72 | $ | 16.50 | $ | 18.33 | ||||||||||
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Total investment return (b) | 3.12 | % | 16.11 | % | 3.60 | % | 0.40 | % | 10.21 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.72 | % | 0.95 | % | 1.14 | % | 0.45 | % | 0.67 | % | ||||||||||
Net expenses (c) | 1.13 | % | 1.14 | % | 1.18 | % | 1.15 | % | 1.16 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 1.14 | % | 1.15 | % | 1.18 | % | 1.15 | % | 1.16 | % | ||||||||||
Portfolio turnover rate | 43 | % | 38 | % | 24 | % | 60 | % | 59 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 52,723 | $ | 56,289 | $ | 79,430 | $ | 82,052 | $ | 85,850 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
18 | MainStay MacKay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 17.67 | $ | 15.66 | $ | 16.45 | $ | 18.30 | $ | 17.37 | ||||||||||
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Net investment income (loss) (a) | (0.01 | ) | 0.04 | 0.06 | (0.05 | ) | (0.01 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.39 | 2.32 | 0.35 | 0.01 | 1.59 | |||||||||||||||
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Total from investment operations | 0.38 | 2.36 | 0.41 | (0.04 | ) | 1.58 | ||||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.06 | ) | (0.09 | ) | (0.50 | ) | (0.35 | ) | (0.42 | ) | ||||||||||
From net realized gain on investments | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | ||||||||||
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Total dividends and distributions | (1.07 | ) | (0.35 | ) | (1.20 | ) | (1.81 | ) | (0.65 | ) | ||||||||||
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Net asset value at end of year | $ | 16.98 | $ | 17.67 | $ | 15.66 | $ | 16.45 | $ | 18.30 | ||||||||||
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Total investment return (b) | 2.35 | % | 15.21 | % | 2.83 | % | (0.36 | %) | 9.41 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.03 | %) | 0.21 | % | 0.39 | % | (0.30 | %) | (0.08 | %) | ||||||||||
Net expenses (c) | 1.88 | % | 1.89 | % | 1.93 | % | 1.90 | % | 1.91 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 1.89 | % | 1.90 | % | 1.93 | % | 1.90 | % | 1.91 | % | ||||||||||
Portfolio turnover rate | 43 | % | 38 | % | 24 | % | 60 | % | 59 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 15,051 | $ | 19,290 | $ | 21,436 | $ | 26,537 | $ | 29,765 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 17.65 | $ | 15.64 | $ | 16.43 | $ | 18.29 | $ | 17.36 | ||||||||||
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Net investment income (loss) (a) | (0.00 | )‡ | 0.04 | 0.06 | (0.05 | ) | (0.01 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 0.38 | 2.32 | 0.35 | (0.00 | )‡ | 1.59 | ||||||||||||||
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Total from investment operations | 0.38 | 2.36 | 0.41 | (0.05 | ) | 1.58 | ||||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.06 | ) | (0.09 | ) | (0.50 | ) | (0.35 | ) | (0.42 | ) | ||||||||||
From net realized gain on investments | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | ||||||||||
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Total dividends and distributions | (1.07 | ) | (0.35 | ) | (1.20 | ) | (1.81 | ) | (0.65 | ) | ||||||||||
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Net asset value at end of year | $ | 16.96 | $ | 17.65 | $ | 15.64 | $ | 16.43 | $ | 18.29 | ||||||||||
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Total investment return (b) | 2.35 | % | 15.23 | % | 2.77 | % | (0.30 | %) | 9.35 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.03 | %) | 0.21 | % | 0.39 | % | (0.30 | %) | (0.08 | %) | ||||||||||
Net expenses (c) | 1.88 | % | 1.89 | % | 1.93 | % | 1.90 | % | 1.91 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 1.89 | % | 1.90 | % | 1.93 | % | 1.90 | % | 1.91 | % | ||||||||||
Portfolio turnover rate | 43 | % | 38 | % | 24 | % | 60 | % | 59 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 80,830 | $ | 82,335 | $ | 76,501 | $ | 91,833 | $ | 92,118 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class I | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 17.79 | $ | 15.75 | $ | 16.54 | $ | 18.36 | $ | 17.35 | ||||||||||
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Net investment income (loss) (a) | 0.22 | 0.25 | 0.24 | 0.15 | 0.20 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.39 | 2.34 | 0.35 | (0.00 | )‡ | 1.60 | ||||||||||||||
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Total from investment operations | 0.61 | 2.59 | 0.59 | 0.15 | 1.80 | |||||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.28 | ) | (0.29 | ) | (0.68 | ) | (0.51 | ) | (0.56 | ) | ||||||||||
From net realized gain on investments | (1.01 | ) | (0.26 | ) | (0.70 | ) | (1.46 | ) | (0.23 | ) | ||||||||||
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Total dividends and distributions | (1.29 | ) | (0.55 | ) | (1.38 | ) | (1.97 | ) | (0.79 | ) | ||||||||||
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Net asset value at end of year | $ | 17.11 | $ | 17.79 | $ | 15.75 | $ | 16.54 | $ | 18.36 | ||||||||||
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| |||||||||||
Total investment return (b) | 3.65 | % | 16.69 | % | 3.96 | % | 0.84 | % | 10.74 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.25 | % | 1.45 | % | 1.56 | % | 0.87 | % | 1.11 | % | ||||||||||
Net expenses (c) | 0.61 | % | 0.64 | % | 0.76 | % | 0.74 | % | 0.72 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 0.73 | % | 0.74 | % | 0.76 | % | 0.74 | % | 0.72 | % | ||||||||||
Portfolio turnover rate | 43 | % | 38 | % | 24 | % | 60 | % | 59 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 683,594 | $ | 562,526 | $ | 252,852 | $ | 298,015 | $ | 313,955 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
20 | MainStay MacKay Convertible Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay Convertible Fund (formerly known as MainStay Convertible Fund) (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has seven classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on May 1, 1986. Class C shares commenced operations on September 1, 1998. Investor Class shares commenced operations on February 28, 2008. Class I shares commenced operations on November 28, 2008. Class R6 and Class T shares were registered for sale effective as of February 28, 2017. As of October 31, 2018, Class R6 and Class T shares were not yet offered for sale. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made
within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class and Class T shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek capital appreciation together with current income.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
21 |
Notes to Financial Statements (continued)
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker / dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids / offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation
22 | MainStay MacKay Convertible Fund |
date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least quarterly and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
23 |
Notes to Financial Statements (continued)
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may increase the costs of investing in mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of October 31, 2018, the Fund did not hold any repurchase agreements.
(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any
cash received as collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activity, if any, is reflected in the Statement of Operations. As of October 31, 2018, the Fund had securities on loan with a value of $51,336,767 and had received non-cash collateral in the form of U.S. Treasury securities with a value of $51,881,049.
(I) Convertible Securities Risk. Convertible securities may be subordinate to other securities. In part, the total return for a convertible security depends upon the performance of the underlying stock into which it can be converted. Also, issuers of convertible securities are often not as strong financially as those issuing securities with higher credit ratings, are more likely to encounter financial difficulties and typically are more vulnerable to changes in the economy, such as a recession or a sustained period of rising interest rates, which could affect their ability to make interest and principal payments.
(J) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.60% up
24 | MainStay MacKay Convertible Fund |
to $500 million; 0.55% from $500 million to $1 billion; and 0.50% in excess of $1 billion, plus a fee for fund accounting services, previously provided by New York Life Investments under a separate fund accounting agreement, furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the year ended October 31, 2018, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.57%, inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
Effective February 28, 2018, New York Life Investments has contractually agreed to waive fees and/or reimburse expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) of Class I shares so that Total Annual Fund Operating Expenses of Class I shares do not exceed 0.61% of the Fund’s average daily net assets. New York Life Investments has also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. These agreements will remain in effect until February 28, 2019, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $7,050,614 and waived fees/reimbursed expenses in the amount of $701,850.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class and Class T Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class T shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class T shares for distribution and/or service activities as designated by the Distributor. Pursuant to
the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. During the year ended October 31, 2018, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $147,025 and $32,645, respectively.
During the year ended October 31, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $3,940, $36, $14,051 and $9,874, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 589,457 | ||
Investor Class | 154,941 | |||
Class B | 48,976 | |||
Class C | 230,752 | |||
Class I | 656,151 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
25 |
Notes to Financial Statements (continued)
(F) Investments in Affiliates (in 000’s).
During the year ended October 31, 2018, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Companies | Value, Beginning of Year | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Year | Dividend Income | Other Distributions | Shares End of Year | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | — | $ | 252,915 | $ | (126,612 | ) | $ | — | $ | — | $ | 126,303 | $ | 724 | $ | — | 126,303 | ||||||||||||||||||
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Note 4–Federal Income Tax
As of October 31, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 1,283,154,396 | $ | 108,070,337 | $ | (53,106,373 | ) | $ | 54,963,964 |
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary Income | Accumulated Capital and Other Gain (Loss) | Other Temporary Differences | Unrealized Appreciation (Depreciation) | Total Accumulated Gain (Loss) | ||||
$28,440,761 | $39,052,149 | $— | $54,963,964 | $122,456,874 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily due to deemed dividends and Contingent Payment Debt Instruments (CPDI).
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 19,372,404 | $ | 14,271,729 | ||||
Long-Term Capital Gain | 61,089,527 | 13,550,742 | ||||||
Total | $ | 80,461,931 | $ | 27,822,471 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to July 31, 2018, the aggregate commitment amount and the commitment fee were the same as those under the current Credit Agreement. During the year ended October 31, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the year ended October 31, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2018, purchases and sales of securities, other than short-term securities, were $594,572 and $490,787, respectively.
26 | MainStay MacKay Convertible Fund |
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 6,951,046 | $ | 123,130,438 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,951,305 | 32,664,323 | ||||||
Shares redeemed | (6,160,505 | ) | (107,832,361 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 2,741,846 | 47,962,400 | ||||||
Shares converted into Class A (See Note 1) | 677,884 | 11,958,226 | ||||||
Shares converted from Class A (See Note 1) | (224,823 | ) | (4,036,018 | ) | ||||
|
| |||||||
Net increase (decrease) | 3,194,907 | $ | 55,884,608 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 7,047,066 | $ | 119,088,807 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 693,680 | 11,565,480 | ||||||
Shares redeemed | (5,380,336 | ) | (90,991,876 | ) | ||||
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| |||||||
Net increase (decrease) in shares outstanding before conversion | 2,360,410 | 39,662,411 | ||||||
Shares converted into Class A (See Note 1) | 2,256,234 | 39,055,267 | ||||||
Shares converted from Class A (See Note 1) | (886,885 | ) | (15,116,071 | ) | ||||
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| |||||||
Net increase (decrease) | 3,729,759 | $ | 63,601,607 | |||||
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| |||||||
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 477,345 | $ | 8,402,387 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 227,114 | 3,796,070 | ||||||
Shares redeemed | (316,976 | ) | (5,549,168 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 387,483 | 6,649,289 | ||||||
Shares converted into Investor Class (See Note 1) | 145,958 | 2,599,355 | ||||||
Shares converted from Investor Class (See Note 1) | (615,915 | ) | (10,852,240 | ) | ||||
|
| |||||||
Net increase (decrease) | (82,474 | ) | $ | (1,603,596 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 517,721 | $ | 8,778,329 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 135,820 | 2,252,806 | ||||||
Shares redeemed | (506,890 | ) | (8,576,771 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 146,651 | 2,454,364 | ||||||
Shares converted into Investor Class (See Note 1) | 188,275 | 3,200,427 | ||||||
Shares converted from Investor Class (See Note 1) | (2,216,858 | ) | (38,363,861 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,881,932 | ) | $ | (32,709,070 | ) | |||
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Class B | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 54,400 | $ | 953,788 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 62,726 | 1,040,344 | ||||||
Shares redeemed | (190,681 | ) | (3,325,606 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (73,555 | ) | (1,331,474 | ) | ||||
Shares converted from Class B (See Note 1) | (131,697 | ) | (2,330,239 | ) | ||||
|
| |||||||
Net increase (decrease) | (205,252 | ) | $ | (3,661,713 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 123,659 | $ | 2,058,626 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 24,550 | 403,492 | ||||||
Shares redeemed | (274,643 | ) | (4,623,932 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (126,434 | ) | (2,161,814 | ) | ||||
Shares converted from Class B (See Note 1) | (151,045 | ) | (2,562,426 | ) | ||||
|
| |||||||
Net increase (decrease) | (277,479 | ) | $ | (4,724,240 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 943,151 | $ | 16,541,245 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 251,595 | 4,167,959 | ||||||
Shares redeemed | (1,093,646 | ) | (19,054,723 | ) | ||||
|
| |||||||
Net increase (decrease) | 101,100 | $ | 1,654,481 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,179,483 | $ | 19,833,250 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 81,268 | 1,334,519 | ||||||
Shares redeemed | (1,487,251 | ) | (24,998,988 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (226,500 | ) | (3,831,219 | ) | ||||
Shares converted from Class C (See Note 1) | (706 | ) | (11,550 | ) | ||||
|
| |||||||
Net increase (decrease) | (227,206 | ) | $ | (3,842,769 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 21,352,015 | $ | 378,690,014 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,723,558 | 28,971,052 | ||||||
Shares redeemed | (14,889,150 | ) | (260,911,854 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 8,186,423 | 146,749,212 | ||||||
Shares converted into Class I (See Note 1) | 147,369 | 2,660,916 | ||||||
|
| |||||||
Net increase (decrease) | 8,333,792 | $ | 149,410,128 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 23,037,821 | $ | 390,684,500 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 495,163 | 8,342,082 | ||||||
Shares redeemed | (8,767,214 | ) | (149,293,046 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 14,765,770 | 249,733,536 | ||||||
Shares converted into Class I (See Note 1) | 807,465 | 13,798,214 | ||||||
|
| |||||||
Net increase (decrease) | 15,573,235 | $ | 263,531,750 | |||||
|
|
27 |
Notes to Financial Statements (continued)
Note 10–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
28 | MainStay MacKay Convertible Fund |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The MainStay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MainStay MacKay Convertible Fund (formerly, MainStay Convertible Fund) (the Fund), one of the funds constituting The MainStay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians, the transfer agent, and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
29 |
Federal Income Tax Information
(Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders in a written statement as to the federal tax status of dividends paid by the Fund during such fiscal years. Accordingly, the Fund paid $61,089,527 as long term capital gain distributions.
For the fiscal year ended October 31, 2018, the Fund designated approximately $4,633,693 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2018 should be multiplied by the 23.98% to arrive at the amount eligible for the corporate dividend-received deduction.
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
30 | MainStay MacKay Convertible Fund |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
31 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
32 | MainStay MacKay Convertible Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
33 |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
* | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
34 | MainStay MacKay Convertible Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1716013 MS293-18 | MSC11-12/18 (NYLIM) NL210 |
MainStay Income Builder Fund
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception Date | One Year | Five Years or Since Inception | Ten Years | Gross Expense Ratio3 | ||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | –7.75 –2.38 | %
| | 3.32 4.49 | %
| | 8.39 9.00 | %
| | 1.01 1.01 | %
| |||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –7.91 –2.56 |
| | 3.15 4.32 |
| | 8.14 8.75 |
| | 1.14 1.14 |
| |||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 12/29/1987 | | –7.86 –3.22 |
| | 3.22 3.55 |
| | 7.95 7.95 |
| | 1.89 1.89 |
| |||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | –4.20 –3.28 |
| | 3.55 3.55 |
| | 7.94 7.94 |
| | 1.89 1.89 |
| |||||||||
Class I Shares | No Sales Charge | 1/2/2004 | –2.17 | 4.75 | 9.28 | 0.76 | ||||||||||||||||||
Class R2 Shares | No Sales Charge | 2/27/2015 | –2.48 | 2.45 | N/A | 1.11 | ||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | –2.73 | 6.76 | N/A | 1.36 | ||||||||||||||||||
Class R6 Shares | No Sales Charge | 2/28/2018 | –0.61 | –0.61 | N/A | 0.66 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
MSCI World Index4 | 1.16 | % | 6.81 | % | 10.02 | % | ||||||
Bloomberg Barclays U.S. Aggregate Bond Index5 | –2.05 | 1.83 | 3.94 | |||||||||
Blended Benchmark Index6 | –0.30 | 4.44 | 7.23 | |||||||||
Morningstar World Allocation Category Average7 | –3.07 | 2.80 | 7.15 |
4. | The MSCI World Index is the Fund’s primary broad-based securities market index for comparison purposes. The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Fund has selected the Bloomberg Barclays U.S. Aggregate Bond Index as a secondary benchmark. The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Fund has selected the Blended Benchmark Index as an additional benchmark. The Blended Benchmark Index consists of the MSCI World Index and the Bloomberg Barclays U.S. Aggregate Bond Index weighted 50%/50%, respectively. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
7. | The Morningstar World Allocation Category Average is representative of funds that seek to provide both capital appreciation and income by investing in three major areas: stocks, bonds, and cash. While these portfolios do explore the whole world, most of them focus on the U.S., Canada, Japan, and the larger markets in Europe. It is rare for such portfolios to invest more than 10% of their assets in emerging markets. These portfolios typically have at least 10% of assets in bonds, less than 70% of assets in stocks, and at least 40% of assets in non-U.S. stocks or bonds. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay Income Builder Fund |
Cost in Dollars of a $1,000 Investment in MainStay Income Builder Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 10/31/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 993.60 | $ | 5.08 | $ | 1,020.11 | $ | 5.14 | 1.01% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 992.50 | $ | 5.68 | $ | 1,019.51 | $ | 5.75 | 1.13% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 989.30 | $ | 9.43 | $ | 1,015.73 | $ | 9.55 | 1.88% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 988.70 | $ | 9.42 | $ | 1,015.73 | $ | 9.55 | 1.88% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 994.40 | $ | 3.82 | $ | 1,021.37 | $ | 3.87 | 0.76% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 993.10 | $ | 5.58 | $ | 1,019.61 | $ | 5.65 | 1.11% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 991.40 | $ | 6.83 | $ | 1,018.35 | $ | 6.92 | 1.36% | |||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 994.90 | $ | 3.32 | $ | 1,021.88 | $ | 3.36 | 0.66% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Portfolio Composition as of October 31, 2018 (Unaudited)
See Portfolio of Investments beginning on page 13 for specific holdings within these categories. The Fund’s portfolio is subject to change.
Top Ten Holdings or Issuers Held as of October 31, 2018 (excluding short-term investment) (Unaudited)
1. | Federal National Mortgage Association (Mortgage Pass-Through Securities), 4.00%–7.00%, due 7/1/20–5/1/48 |
2. | United States Treasury Bonds, 2.75%–4.375%, |
3. | United States Treasury Notes, 1.75%–2.875%, |
4. | Federal Home Loan Mortgage Corporation (Mortgage Pass-Through Securities), 3.00%–7.50%, due 9/1/26–2/1/48 |
5. | Morgan Stanley, 2.375%–7.25%, due 7/15/19–7/24/42 |
6. | Verizon Communications, Inc. |
7. | Bank of America Corp., 2.738%–8.57%, due 6/17/19–4/19/26 |
8. | AT&T, Inc. |
9. | AstraZeneca PLC, Sponsored ADR (United Kingdom) |
10. | Westpac Banking Corp. |
8 | MainStay Income Builder Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Jae S. Yoon and Jonathan Swaney of New York Life Investment Management LLC, the Fund’s Manager; Dan Roberts, PhD, Louis N. Cohen, CFA,1 Stephen R. Cianci, CFA, and Neil Moriarty, III, of MacKay Shields LLC, the Subadvisor for the fixed-income portion of the Fund; and William W. Priest, CFA, Michael A. Welhoelter, CFA, Kera Van Valen, CFA and John Tobin, PhD, CFA, of Epoch Investment Partners, Inc., the Subadvisor for the equity portion of the Fund.
How did MainStay Income Builder Fund perform relative to its benchmarks and peer group during the 12 months ended October 31, 2018?
For the 12 months ended October 31, 2018, Class I shares of MainStay Income Builder Fund returned –2.17%, underperforming the 1.16% return of the Fund’s primary benchmark, the MSCI World Index. Over the same period, Class I shares underperformed the –2.05% return of the Bloomberg Barclays U.S. Aggregate Bond Index, which is the Fund’s secondary benchmark, and the –0.30% return the of the Blended Benchmark Index, which is an additional benchmark of the Fund. For the 12 months ended October 31, 2018, Class I shares of the Fund outperformed the –3.07% return of the Morningstar World Allocation Category Average.2
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, Jae S. Yoon and Jonathan Swaney were added as portfolio managers of the Fund and Michael Kimble was removed. Effective October 18, 2018, Stephen Cianci and Neil Moriarty were added as portfolio managers of the Fund. For more information on this change, refer to the supplement dated October 18, 2018.
During the reporting period, how was the Fund’s performance materially affected by investments in derivatives?
During the reporting period, the fixed-income portion of the Fund used equity futures to enhance the Fund’s equity beta.3 This positioning slightly detracted from the Fund’s performance. Over the same period, the fixed-income portion of the Fund also used currency forwards to hedge against local currency exposure, which positively affected the Fund’s performance.
What factors affected the relative performance of the equity portion of the Fund during the reporting period?
The Fund provided a negative return for the 12 months ended October 31, 2018, trailing the MSCI World Index. In the equity portion of the Fund, relative performance was driven by sector exposures, which largely reflect our fundamental, bottom-up investment process and stock selection. Relative performance was negatively affected by a substantially underweight position in information technology and e-commerce companies, which typically reinvest nearly all free cash flow back into the business and have
dividend yields that are quite low or nonexistent. Stock selection in the consumer discretionary and consumer staples sectors, among others, also detracted from relative performance in the equity portion of the Fund. On the positive side, the relative performance of the equity portion of the Fund benefited from stock selection in energy and health care and an underweight position in the financials sector.
During the reporting period, which sectors were the strongest positive contributors to the relative performance of the equity portion of the Fund and which sectors were particularly weak?
During the reporting period, the strongest positive sector contributors to the performance of the equity portion of the Fund relative to the MSCI World Index were energy, health care and financials. (Contributions take weightings and total returns into account.) Over the same period, the consumer discretionary sector was the largest detractor from the relative performance of the equity portion of the Fund, followed by information technology and consumer staples.
During the reporting period, which individual stocks made the strongest positive contributions to absolute performance in the equity portion of the Fund and which stocks detracted the most?
Verizon, Cisco Systems and Pfizer were among the strongest positive contributors to absolute performance in the equity portion of the Fund. Verizon is a leading provider of telecommunication services in the United States. The company’s shares performed well on strong service revenue growth and continued subscriber additions. Recently, the industry has shown better competitive discipline, and customers who were on lower-priced tiered plans started to move toward Verizon’s higher-priced unlimited offerings. In our opinion, the proposed Sprint/T-Mobile merger is now more likely to be successfully completed, which we believe would help support pricing industry-wide. Verizon management remains committed to maintaining the company’s leadership in network quality. In our view, Verizon pays a well-covered dividend and is progressing on its debt reduction plans. Cisco Systems is the world’s largest supplier of routers and switches. We believe that adoption of its subscription service, which is required to get the most out of the new intent-based networking switch, the Catalyst 9000, has been a major share driver. Earnings results have demonstrated increasing penetration of the subscription service, and the company intends to
1. | Louis Cohen will serve as a portfolio manager of the Fund until on or about December 31, 2018. |
2. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
3. | Beta is a measure of volatility in relation to the market as a whole. A beta higher than 1 indicates that a security or portfolio will tend to exhibit higher volatility than the market. A beta lower than 1 indicates that a security or portfolio will tend to exhibit lower volatility than the market. |
9 |
roll out this architecture across its product portfolio. The company has a policy of returning more than 50% of its cash generation through a progressive dividend and share repurchases. Pfizer is a global pharmaceutical company with a diversified portfolio of products including medicines, vaccines and consumer health care products. Shares traded higher after strong fundamental performance throughout 2018, as well as, in our view, increasing investor confidence that sales and cash flow growth could accelerate after 2020 as the company moves past loss-of-exclusivity headwinds on select drugs. We believe that Pfizer has a strong balance sheet and that the company’s free cash flow comfortably covers its attractive, growing dividend and steady share repurchases.
The most significant detractors from absolute performance in the equity portion of the Fund were British American Tobacco and Las Vegas Sands. British American Tobacco came under pressure along with its tobacco peers as investors continued to be concerned about the pace of growth in next-generation products. Although the company has a diversified next-generation product portfolio, concerns about long-term growth affected both heat-not-burn and vaping. Management remains confident in the company’s ability to continue to drive profit margin growth over the long term as next-generation products continue to gain traction. Top-line growth, coupled with disciplined cost controls and a strong focus on innovation, allowed British American Tobacco to generate strong cash flows and consistently return cash to shareholders through a growing dividend. As of October 31, 2018, the equity portion of the Fund retained its position in British American Tobacco. Casino resort company Las Vegas Sands traded lower on several concerns, including decelerating monthly gross gaming revenue growth, uncertainty regarding casino concession contract renewal, potential regional competition, Chinese economic conditions, a U.S.-China trade war and the impact of Typhoon Mangkhut in September. Overall, we believe that the company’s cash flows are secure for the foreseeable future and should continue to grow over the long term, driven by increasing visits and higher spending per visit among the company’s relatively stable mass-market client base. In our view, Las Vegas Sands is committed to maintaining a strong balance sheet and consistently returning cash to owners through attractive and steadily increasing dividends, supplemented by share repurchases. At the end of the reporting period, the equity portion of the Fund retained its position in Las Vegas Sands.
What were some of the largest purchases and sales in the equity portion of the Fund during the reporting period?
During the reporting period, the equity portion of the Fund purchased new positions in several stocks, including Hanesbrands, Kraft Heinz and LyondellBasell Industries. Hanesbrands is one of the largest manufacturers of intimate apparel, underwear, socks, T-shirts and activewear in the United States,
Canada, Mexico and Europe. The company’s brands include Hanes, Champion, Playtex, Maidenform and Gear for Sports. The company generates cash by selling its products to retailers, consumers and wholesalers globally. Hanesbrands targets a 25% to 30% earnings payout ratio and is committed to paying an attractive dividend that grows in line with earnings over time. When debt leverage is within the company’s target range, the company will return excess cash through share repurchases, value-creating acquisitions or both. When debt leverage is above the target range, the company will use excess cash for debt repayment. Hanesbrands also prioritizes investing in the business through internal projects to drive profitable growth. Kraft Heinz is a North American packaged food and beverage company with strong brands and solid market share positions. Management continues to drive growth through brand investment, product innovation/renovation, data-driven marketing and cost containment. The company generates levels of free cash flow that we find attractive, and it returns cash to shareholders through a combination of dividends and debt reduction. LyondellBasell is a large global producer of petrochemicals (ethylene, propylene and downstream derivatives), and the company owns and operates several refinery complexes in Texas. In our opinion, cash flows are driven by the structurally growing long-term demand for building-block chemicals used in the manufacture of a wide variety of plastic products, and we believe that growth in the coming years could be enhanced by several plant expansion projects. In our opinion, the company’s plants enjoy a cost advantage because of U.S. Gulf Coast locations that utilize feedstocks derived from shale gas. The refinery complexes are able to produce refined products like gasoline and diesel fuel from low-cost heavy sour crude oil. The company generates significant free cash flow, and it returns cash to shareholders through a growing dividend that we find attractive and through consistent share repurchases.
Among the positions that the equity portion of the Fund closed during the reporting period were Swisscom, Sky and Regal Entertainment. Swisscom is the leading communication provider in Switzerland. The company offers wireless; traditional wireline telephone; and cable, Internet and telephony services. Through Fastweb, Swisscom is a leading provider of cable, Internet and telephony in Italy. The company pays a regular annual dividend that is supported by strong underlying free cash flow. In our view, potential competitor consolidation in Switzerland and expanded ambitions in Italy have decreased the company’s viability for medium-term cash flow growth, which led us to exit the stock. Sky is the largest pay TV provider in the United Kingdom and Ireland. It also has a sizable presence in Germany and Italy through Sky Italia and Sky Deutschland. Sky shares rose on a deal by Disney to acquire almost all of 21st Century Fox’s assets including its current 60.9% stake in Sky, as well as the rest of the shares that are currently with the regulatory committee. With a compressed yield and only one special
10 | MainStay Income Builder Fund |
dividend to be paid in 2018, the Fund sold its shares and reallocated proceeds to stocks with higher yields. Regal Entertainment operates a chain of movie theaters in the United States under the Regal Cinemas, Edwards Theaters and United Artists Theaters brands. It is the largest theater circuit in the United States with over 7,000 screens. The equity portion of the Fund exited its position in Regal Entertainment after it was announced that the company had agreed to be acquired for cash by Cineworld Group.
How did sector weightings change in the equity portion of the Fund during the reporting period?
During the reporting period, the most substantial sector weighting increases in the equity portion of the Fund were in financials and health care. Over the same period, the most substantial sector weighting reductions in the equity portion of the Fund were in telecommunication services and industrials. Sector allocations in the equity portion of the Fund are a result of our bottom-up fundamental investment process and reflect the companies and securities that we confidently believe can collect and distribute sustainable, growing shareholder yield.
How was the equity portion of the Fund positioned at the end of the reporting period?
As of October 31, 2018, the largest sectors in the equity portion of the Fund were financials and utilities, and the smallest sectors were materials and consumer discretionary. As of the same date, the most substantially overweight sector positions relative to the MSCI World Index in the equity portion of the Fund were in utilities and telecommunications services. These are defensive sectors that are typically more heavily represented in the equity portion of the Fund. As of October 31, 2018, the most substantially underweight sectors relative to the benchmark in the equity portion of the Fund were information technology and consumer discretionary.
What factors affected the relative performance of the fixed-income portion of the Fund during the reporting period?
The fixed-income portion of the Fund outperformed relative to the Bloomberg Barclays U.S. Aggregate Bond Index primarily because of an overweight position in credit—such as investment-grade corporate bonds, high-yield corporate bonds and bank loans—which offered a healthy yield advantage over comparable-duration U.S. Treasury securities. The yield advantage offset the downside effects of spread4 widening in the
credit sectors. The Fund’s shorter duration profile also benefited the relative performance of the fixed-income portion of the fund as U.S. Treasury yields rose across the yield curve,5 more so on the front end.
The most significant factor that influenced the fixed-income markets during the reporting period continued to be the Federal Reserve’s interest-rate policy. U.S. Treasury yields rose across the yield curve, though less so in longer maturities, in response to the Federal Open Market Committee raising the federal funds target range four times during the reporting period to forestall any potential of the economy overheating. Ballooning U.S. Treasury security issuance to fund the budget deficit also influenced higher rates. Increases at the long-end of the yield curve were more modest and reflected tepid inflation, trade policy flux and the long-end’s pedigree as a refuge from pockets of regional tension. The Tax and Jobs Act was signed into law during the reporting period, creating the most significant tax overhaul in three decades. The recent tax cuts supported earnings growth in 2018, but we question the sustainability of earnings as the one-time boost from tax cuts begins to fade.
The stock market tempered its momentum as investors questioned the durability of the current business cycle and the ability of corporations to absorb headwinds such as a weaker dollar and higher financing costs. Swayed by similar effects, corporate-bond spreads widened.
What was the Fund’s duration6 strategy during the reporting period?
In order to reduce sensitivity to interest rates, the fixed-income portion of the Fund maintained a duration shorter than the duration of the Bloomberg Barclays U.S. Aggregate Bond Index. As of October 31, 2018, the duration of the fixed-income portion of the Fund was about 5.5 years.
During the reporting period, which sectors were the strongest positive contributors to relative performance of the fixed-income portion of the Fund and which sectors were particularly weak?
During the reporting period, a position in bank loans was the biggest contributor to the relative performance of the fixed-income portion of the Fund. A position in high-yield bonds also performed well on a relative basis because the higher coupons dampened interest-rate sensitivity in the fixed-income portion of the Fund. Among the Fund’s credit investments, industrials contributed positively to relative performance while financials
4. | The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time. The term “credit spread” typically refers to the difference in yield between corporate or municipal bonds (or a specific category of these bonds) and comparable U.S. Treasury issues. |
5. | The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting. |
6 | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
11 |
detracted from relative performance. The fixed-income portion of the Fund had a small position in emerging market credit, which was a slight detractor from relative performance.
Coupled with an overweight position in credit was an underweight position in sectors of the market that tend to be more interest-rate sensitive, such as U.S. Treasury securities and mortgage-backed securities. Both of these sectors were negatively affected by higher interest rates, so the underweight positions in the fixed-income portion of the Fund benefited relative performance during the reporting period.
What were some of the largest purchases and sales in the fixed-income portion of the Fund during the reporting period?
During the reporting period, the fixed-income portion of the Fund initiated a position in Crown Castle Tower secured bonds. The bonds, which carried an A rating,7 were secured by cell towers, and in our opinion, they were attractively priced. Later during the reporting period, the fixed-income portion of the Fund sold the unsecured Crown Castle paper. Although we wanted to maintain exposure to the credit, we also wanted to improve the overall quality of the Fund.
The Fund also initiated a position in a commercial mortgage-backed new single-property issue rated AAA8 that offered what we believed to be an attractively priced opportunity to purchase
a securitized product while diversifying the Fund’s corporate holdings.
The fixed-income portion of the Fund also sold its position in beverage company Anheuser Busch based on current valuations relative to its peers of the same credit quality.
How did the sector weightings in the fixed-income portion of the Fund change during the reporting period?
As credit spreads continued to narrow during the reporting period, the fixed-income portion of the Fund trimmed its weightings in high-yield bonds and, to a lesser degree, bank loans. During the reporting period, the fixed-income portion of the Fund selectively added to investment-grade corporate bonds, and, to a lesser degree, asset-backed securities and commercial mortgage-backed securities.
How was the fixed-income portion of the Fund positioned at the end of the reporting period?
As of October 31, 2018, the fixed-income portion of the Fund held overweight positions relative to the Bloomberg Barclays U.S. Aggregate Bond Index in high-yield credit, bank loans and investment-grade credit. As of the same date, the fixed-income portion of the Fund held underweight positions relative to this Index in U.S. Treasury securities and mortgage-backed securities.
7. | An obligation rated ‘A’ by Standard & Poor’s (“S&P”) is deemed by S&P to be somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. In the opinion of S&P, however, the obligor’s capacity to meet its financial commitment on the obligation is still strong. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
8. | An obligation rated ‘AAA’ has the highest rating assigned by S&P, and in the opinion of S&P, the obligor’s capacity to meet its financial commitment on the obligation is extremely strong. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
12 | MainStay Income Builder Fund |
Portfolio of Investments October 31, 2018
Principal Amount | Value | |||||||
Long-Term Bonds 52.8%† Asset-Backed Securities 0.6% |
| |||||||
Auto Floor Plan Asset-Backed Securities 0.2% |
| |||||||
Navistar Financial Dealer Note Master Owner Trust II | $ | 2,895,000 | $ | 2,897,218 | ||||
|
| |||||||
Home Equity 0.1% |
| |||||||
Ameriquest Mortgage Securities, Inc. | 15,873 | 16,074 | ||||||
Chase Funding Trust | 77,827 | 78,751 | ||||||
Countrywide Asset-Backed Certificates Series 2003-5, Class AF5 | 415,608 | 425,964 | ||||||
Equity One Mortgage | 150,742 | 151,692 | ||||||
JPMorgan Mortgage Acquisition Trust | 419,867 | 293,466 | ||||||
MASTR Asset-Backed Securities Trust | 615,015 | 289,690 | ||||||
Saxon Asset Securities Trust | 73,285 | 74,061 | ||||||
|
| |||||||
1,329,698 | ||||||||
|
| |||||||
Other Asset-Backed Securities 0.3% |
| |||||||
American Tower Trust I | 2,160,000 | 2,092,936 | ||||||
Verizon Owner Trust | 1,895,000 | 1,881,473 | ||||||
|
| |||||||
3,974,409 | ||||||||
|
| |||||||
Student Loans 0.0%‡ |
| |||||||
KeyCorp Student Loan Trust | 187,140 | 186,556 | ||||||
|
| |||||||
Total Asset-Backed Securities | 8,387,881 | |||||||
|
|
Principal Amount | Value | |||||||
Corporate Bonds 35.4% |
| |||||||
Aerospace & Defense 0.4% |
| |||||||
Harris Corp. | $ | 2,215,000 | $ | 2,214,580 | ||||
KLX, Inc. | 3,485,000 | 3,589,550 | ||||||
|
| |||||||
5,804,130 | ||||||||
|
| |||||||
Agriculture 0.0%‡ |
| |||||||
Reynolds American, Inc. | 255,000 | 262,880 | ||||||
|
| |||||||
Airlines 0.9% |
| |||||||
American Airlines Group, Inc. | 3,700,000 | 3,700,000 | ||||||
American Airlines, Inc. | ||||||||
Series 2016-2, Class AA, | 626,960 | 591,694 | ||||||
Series 2017-2, Class AA, | 972,939 | 923,318 | ||||||
Series 2015-2, Class AA | 3,085,628 | 2,975,780 | ||||||
Series 2016-2, Class AA, | 221,280 | 212,562 | ||||||
Continental Airlines, Inc. | 1,358,796 | 1,408,052 | ||||||
U.S. Airways Group, Inc. | ||||||||
Series 2012-1, Class A | 1,608,085 | 1,720,651 | ||||||
Series 2010-1, Class A | 773,710 | 825,316 | ||||||
UAL Pass Through Trust | 1,418,589 | 1,480,652 | ||||||
|
| |||||||
13,838,025 | ||||||||
|
| |||||||
Auto Manufacturers 1.1% |
| |||||||
Daimler Finance North America LLC | 2,400,000 | 2,401,152 | ||||||
Ford Motor Co. |
| |||||||
7.45%, due 7/16/31 | 100,000 | 105,243 | ||||||
8.90%, due 1/15/32 | 215,000 | 250,689 | ||||||
Ford Motor Credit Co. LLC | 350,000 | 362,277 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Auto Manufacturers (continued) |
| |||||||
General Motors Financial Co., Inc. | ||||||||
3.15%, due 6/30/22 | $ | 900,000 | $ | 864,382 | ||||
3.20%, due 7/13/20 | 1,800,000 | 1,784,070 | ||||||
3.45%, due 4/10/22 | 3,800,000 | 3,699,128 | ||||||
4.20%, due 3/1/21 | 2,585,000 | 2,597,952 | ||||||
Toyota Motor Credit Corp. | 4,620,000 | 4,615,643 | ||||||
|
| |||||||
16,680,536 | ||||||||
|
| |||||||
Auto Parts & Equipment 0.2% |
| |||||||
LKQ European Holdings B.V. | EUR | 2,140,000 | 2,385,938 | |||||
|
| |||||||
Banks 9.1% |
| |||||||
Bank of America Corp. | ||||||||
2.738%, due 1/23/22 (d) | $ | 3,260,000 | 3,195,228 | |||||
3.004%, due 12/20/23 (d) | 1,794,000 | 1,726,185 | ||||||
3.499%, due 5/17/22 (d) | 4,490,000 | 4,468,777 | ||||||
3.50%, due 4/19/26 | 415,000 | 394,754 | ||||||
4.20%, due 8/26/24 | 2,615,000 | 2,594,268 | ||||||
5.125%, due 6/17/19 (d)(e) | 575,000 | 573,563 | ||||||
6.30%, due 3/10/26 (d)(e) | 2,085,000 | 2,197,069 | ||||||
8.57%, due 11/15/24 | 485,000 | 589,324 | ||||||
Bank of New York Mellon Corp. | 3,275,000 | 3,090,781 | ||||||
Barclays PLC (United Kingdom) | ||||||||
2.75%, due 11/8/19 | 936,000 | 929,469 | ||||||
5.20%, due 5/12/26 | 5,570,000 | 5,406,370 | ||||||
Capital One Financial Corp. | 435,000 | 419,782 | ||||||
Citibank N.A. | ||||||||
2.125%, due 10/20/20 | 4,590,000 | 4,482,576 | ||||||
3.40%, due 7/23/21 | 3,585,000 | 3,569,658 | ||||||
Citigroup, Inc. | ||||||||
3.668%, due 7/24/28 (d) | 1,180,000 | 1,106,021 | ||||||
4.05%, due 7/30/22 | 105,000 | 105,449 | ||||||
5.30%, due 5/6/44 | 1,200,000 | 1,209,067 | ||||||
6.625%, due 6/15/32 | 770,000 | 894,677 | ||||||
6.875%, due 6/1/25 | 1,715,000 | 1,944,331 | ||||||
Citizens Financial Group, Inc. | ||||||||
4.30%, due 12/3/25 | 3,405,000 | 3,335,093 | ||||||
6.00%, due 7/6/23 (d)(e) | 2,660,000 | 2,633,400 | ||||||
Discover Bank | 1,064,000 | 1,117,104 | ||||||
Goldman Sachs Group, Inc. | ||||||||
2.905%, due 7/24/23 (d) | 880,000 | 846,301 | ||||||
2.908%, due 6/5/23 (d) | 800,000 | 770,882 | ||||||
3.484% (3 Month LIBOR + 1.17%), due 5/15/26 (a) | 2,245,000 | 2,237,614 |
Principal Amount | Value | |||||||
Banks (continued) |
| |||||||
Goldman Sachs Group, Inc. (continued) |
| |||||||
3.50%, due 11/16/26 | $ | 1,085,000 | $ | 1,013,562 | ||||
5.25%, due 7/27/21 | 805,000 | 837,214 | ||||||
6.75%, due 10/1/37 | 829,000 | 967,668 | ||||||
Huntington Bancshares, Inc. | ||||||||
3.15%, due 3/14/21 | 3,535,000 | 3,494,869 | ||||||
5.70%, due 4/15/23 (d)(e) | 2,400,000 | 2,352,000 | ||||||
JPMorgan Chase & Co. (d) | ||||||||
3.54%, due 5/1/28 | 2,970,000 | 2,800,292 | ||||||
5.15%, due 5/1/23 (e) | 4,666,000 | 4,580,146 | ||||||
Kreditanstalt Fuer Wiederaufbau | 8,170,000 | 8,148,195 | ||||||
Lloyds Banking Group PLC (United Kingdom) | ||||||||
4.582%, due 12/10/25 | 1,633,000 | 1,574,923 | ||||||
4.65%, due 3/24/26 | 3,090,000 | 2,990,416 | ||||||
Morgan Stanley | ||||||||
2.375%, due 7/23/19 | 1,750,000 | 1,742,615 | ||||||
3.125%, due 1/23/23 | 4,435,000 | 4,291,763 | ||||||
3.875%, due 1/27/26 | 465,000 | 449,585 | ||||||
4.875%, due 11/1/22 | 1,125,000 | 1,160,588 | ||||||
5.00%, due 11/24/25 | 2,855,000 | 2,919,172 | ||||||
5.45%, due 7/15/19 (d)(e) | 2,310,000 | 2,330,513 | ||||||
6.375%, due 7/24/42 | 170,000 | 205,472 | ||||||
7.25%, due 4/1/32 | 3,490,000 | 4,412,034 | ||||||
PNC Bank N.A. | 2,185,000 | 2,129,430 | ||||||
Royal Bank of Scotland Group PLC (United Kingdom) | ||||||||
4.892%, due 5/18/29 (d) | 1,935,000 | 1,884,456 | ||||||
6.00%, due 12/19/23 | 190,000 | 195,232 | ||||||
Santander Holdings USA, Inc. | ||||||||
2.65%, due 4/17/20 | 3,875,000 | 3,826,722 | ||||||
4.40%, due 7/13/27 | 600,000 | 559,976 | ||||||
Santander UK Group Holdings PLC (United Kingdom) | ||||||||
3.571%, due 1/10/23 | 2,230,000 | 2,154,299 | ||||||
3.823%, due 11/3/28 (d) | 1,640,000 | 1,476,753 | ||||||
State Street Corp. | 2,605,000 | 2,577,906 | ||||||
Toronto-Dominion Bank (Canada) | ||||||||
1.80%, due 7/13/21 | 4,295,000 | 4,124,967 | ||||||
3.15%, due 9/17/20 | 4,255,000 | 4,248,759 | ||||||
U.S. Bank N.A. | 2,655,000 | 2,655,740 | ||||||
Wachovia Corp. | 315,000 | 332,171 | ||||||
Wells Fargo & Co. | 55,000 | 53,352 |
14 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Banks (continued) |
| |||||||
Wells Fargo Bank N.A. | ||||||||
2.40%, due 1/15/20 | $ | 1,875,000 | $ | 1,859,126 | ||||
2.60%, due 1/15/21 | 2,595,000 | 2,545,175 | ||||||
3.55%, due 8/14/23 | 1,815,000 | 1,798,841 | ||||||
5.85%, due 2/1/37 | 140,000 | 156,739 | ||||||
Westpac Banking Corp. (Australia) | ||||||||
2.594% (3 Month LIBOR + 0.28%), due 5/15/20 (a) | 1,935,000 | 1,935,638 | ||||||
4.875%, due 11/19/19 | 5,200,000 | 5,292,872 | ||||||
|
| |||||||
135,916,924 | ||||||||
|
| |||||||
Beverages 0.7% |
| |||||||
Coca-Cola Co. | 3,845,000 | 3,814,094 | ||||||
Constellation Brands, Inc. | ||||||||
2.00%, due 11/7/19 | 2,000,000 | 1,977,933 | ||||||
4.25%, due 5/1/23 | 2,100,000 | 2,119,554 | ||||||
Diageo Capital PLC | 2,420,000 | 2,422,290 | ||||||
|
| |||||||
10,333,871 | ||||||||
|
| |||||||
Biotechnology 0.5% |
| |||||||
Biogen, Inc. | 3,480,000 | 3,472,606 | ||||||
Celgene Corp. | 3,600,000 | 3,496,102 | ||||||
|
| |||||||
6,968,708 | ||||||||
|
| |||||||
Building Materials 0.6% |
| |||||||
Cemex S.A.B. de C.V. | 4,255,000 | 4,489,025 | ||||||
Masco Corp. | 1,575,000 | 1,552,698 | ||||||
Standard Industries, Inc. | 2,940,000 | 2,822,400 | ||||||
|
| |||||||
8,864,123 | ||||||||
|
| |||||||
Chemicals 0.6% |
| |||||||
Air Liquide Finance S.A. (France) (b) | ||||||||
1.375%, due 9/27/19 | 2,535,000 | 2,497,426 | ||||||
1.75%, due 9/27/21 | 1,725,000 | 1,645,155 | ||||||
Braskem Netherlands Finance B.V. | 4,275,000 | 3,971,475 | ||||||
Mexichem S.A.B. de C.V. | 1,800,000 | 1,597,500 | ||||||
|
| |||||||
9,711,556 | ||||||||
|
| |||||||
Commercial Services 0.3% |
| |||||||
Herc Rentals, Inc. | 1,482,000 | 1,563,510 |
Principal Amount | Value | |||||||
Commercial Services (continued) |
| |||||||
Service Corp. International | $ | 3,600,000 | $ | 3,627,000 | ||||
|
| |||||||
5,190,510 | ||||||||
|
| |||||||
Computers 0.6% |
| |||||||
Apple, Inc. | 1,990,000 | 1,887,010 | ||||||
Dell International LLC / EMC Corp. | 5,170,000 | 5,176,472 | ||||||
International Business Machines Corp. | 2,050,000 | 2,408,261 | ||||||
|
| |||||||
9,471,743 | ||||||||
|
| |||||||
Cosmetics & Personal Care 0.2% |
| |||||||
Unilever Capital Corp. | 3,100,000 | 3,039,041 | ||||||
|
| |||||||
Diversified Financial Services 1.8% |
| |||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | 4,265,000 | 4,330,032 | ||||||
Air Lease Corp. | ||||||||
2.125%, due 1/15/20 | 1,950,000 | 1,919,586 | ||||||
2.75%, due 1/15/23 | 1,850,000 | 1,749,844 | ||||||
3.50%, due 1/15/22 | 890,000 | 879,988 | ||||||
4.25%, due 9/15/24 | 1,185,000 | 1,168,390 | ||||||
Capital One Bank USA N.A. | 2,070,000 | 2,149,130 | ||||||
Caterpillar Financial Services Corp. | ||||||||
2.494% (3 Month LIBOR + 0.18%), due 5/15/20 (a) | 2,275,000 | 2,274,167 | ||||||
2.90%, due 3/15/21 | 4,990,000 | 4,937,130 | ||||||
Discover Financial Services | 1,491,000 | 1,462,014 | ||||||
GE Capital International Funding Co. | 1,000,000 | 970,217 | ||||||
International Lease Finance Corp. | ||||||||
5.875%, due 4/1/19 | 1,255,000 | 1,267,614 | ||||||
6.25%, due 5/15/19 | 1,074,000 | 1,091,129 | ||||||
Peachtree Corners Funding Trust | 940,000 | 912,146 | ||||||
Springleaf Finance Corp. | ||||||||
5.25%, due 12/15/19 | 700,000 | 707,000 | ||||||
6.00%, due 6/1/20 | 475,000 | 485,094 | ||||||
|
| |||||||
26,303,481 | ||||||||
|
| |||||||
Electric 1.3% |
| |||||||
AEP Transmission Co. LLC | 2,350,000 | 2,220,177 | ||||||
CMS Energy Corp. |
| |||||||
3.875%, due 3/1/24 | 1,540,000 | 1,530,589 | ||||||
5.05%, due 3/15/22 | 1,220,000 | 1,268,048 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Electric (continued) |
| |||||||
Consolidated Edison, Inc. | $ | 1,205,000 | $ | 1,185,471 | ||||
Duquesne Light Holdings, Inc. (b) | ||||||||
3.616%, due 8/1/27 | 2,265,000 | 2,098,125 | ||||||
6.40%, due 9/15/20 | 2,590,000 | 2,707,666 | ||||||
Entergy Louisiana LLC | 2,200,000 | 2,167,998 | ||||||
Evergy, Inc. | 1,130,000 | 1,170,706 | ||||||
Public Service Electric & Gas Co. | 2,235,000 | 2,100,455 | ||||||
Puget Energy, Inc. | 815,000 | 857,711 | ||||||
Southern California Edison Co. | 870,000 | 864,885 | ||||||
WEC Energy Group, Inc. | 1,095,000 | 1,008,418 | ||||||
|
| |||||||
19,180,249 | ||||||||
|
| |||||||
Environmental Controls 0.3% |
| |||||||
Republic Services, Inc. | 1,615,000 | 1,679,541 | ||||||
Waste Management, Inc. | 2,275,000 | 2,158,347 | ||||||
|
| |||||||
3,837,888 | ||||||||
|
| |||||||
Food 1.5% |
| |||||||
Kerry Group Financial Services Unlimited Co. | 2,899,000 | 2,808,503 | ||||||
Kroger Co. | 4,100,000 | 4,039,914 | ||||||
Mondelez International Holdings Netherlands B.V. (Netherlands) (b) | ||||||||
1.625%, due 10/28/19 | 2,790,000 | 2,743,507 | ||||||
2.00%, due 10/28/21 | 3,050,000 | 2,902,734 | ||||||
Nestle Holdings, Inc. | 2,975,000 | 2,966,708 | ||||||
Smithfield Foods, Inc. (b) | ||||||||
2.70%, due 1/31/20 | 1,690,000 | 1,661,019 | ||||||
3.35%, due 2/1/22 | 1,575,000 | 1,519,112 | ||||||
Tyson Foods, Inc. | 4,235,000 | 4,212,515 | ||||||
|
| |||||||
22,854,012 | ||||||||
|
| |||||||
Gas 0.2% |
| |||||||
AmeriGas Partners, L.P. / AmeriGas Finance Corp. | ||||||||
5.50%, due 5/20/25 | 735,000 | 687,225 | ||||||
5.625%, due 5/20/24 | 1,140,000 | 1,094,400 | ||||||
5.75%, due 5/20/27 | 520,000 | 482,300 |
Principal Amount | Value | |||||||
Gas (continued) |
| |||||||
Southern California Gas Co. | $ | 845,000 | $ | 830,052 | ||||
|
| |||||||
3,093,977 | ||||||||
|
| |||||||
Health Care—Products 1.1% |
| |||||||
Abbott Laboratories | 1,500,000 | 1,483,807 | ||||||
Becton Dickinson & Co. | ||||||||
2.133%, due 6/6/19 | 2,700,000 | 2,682,537 | ||||||
3.70%, due 6/6/27 | 2,210,000 | 2,075,195 | ||||||
Boston Scientific Corp. | 3,740,000 | 3,709,160 | ||||||
Medtronic Global Holdings SCA | 3,090,000 | 3,077,736 | ||||||
Stryker Corp. | 3,395,000 | 3,333,074 | ||||||
|
| |||||||
16,361,509 | ||||||||
|
| |||||||
Health Care—Services 0.2% |
| |||||||
Cigna Corp. | 270,000 | 274,077 | ||||||
Laboratory Corp. of America Holdings | 3,510,000 | 3,510,000 | ||||||
|
| |||||||
3,784,077 | ||||||||
|
| |||||||
Holding Company—Diversified 0.2% |
| |||||||
CK Hutchison International (17) II, Ltd. | 2,620,000 | 2,410,157 | ||||||
|
| |||||||
Home Builders 0.5% |
| |||||||
Lennar Corp. | ||||||||
4.50%, due 6/15/19 | 2,400,000 | 2,406,000 | ||||||
4.50%, due 11/15/19 | 750,000 | 752,813 | ||||||
5.875%, due 11/15/24 | 1,345,000 | 1,351,725 | ||||||
MDC Holdings, Inc. | 2,750,000 | 2,777,500 | ||||||
TRI Pointe Group, Inc. / TRI Pointe Homes, Inc. | 1,000,000 | 1,000,000 | ||||||
|
| |||||||
8,288,038 | ||||||||
|
| |||||||
Insurance 2.4% |
| |||||||
Alterra Finance LLC | 200,000 | 209,158 | ||||||
AXA Equitable Holdings, Inc. | 2,305,000 | 2,054,183 | ||||||
Berkshire Hathaway Finance Corp. | 2,165,000 | 2,064,287 | ||||||
Jackson National Life Global Funding (b) | ||||||||
2.20%, due 1/30/20 | 3,580,000 | 3,538,574 | ||||||
2.811% (3 Month LIBOR + 0.48%), due 6/11/21 (a) | 3,660,000 | 3,673,947 |
16 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Insurance (continued) |
| |||||||
Liberty Mutual Group, Inc. (b) | ||||||||
4.25%, due 6/15/23 | $ | 850,000 | $ | 852,735 | ||||
7.80%, due 3/7/87 | 255,000 | 291,975 | ||||||
Lincoln National Corp. | 3,400,000 | 3,230,852 | ||||||
Markel Corp. | 1,250,000 | 1,223,781 | ||||||
MassMutual Global Funding II (b) | ||||||||
2.50%, due 10/17/22 | 3,347,000 | 3,219,886 | ||||||
2.95%, due 1/11/25 | 1,105,000 | 1,040,433 | ||||||
Metropolitan Life Global Funding I | 2,250,000 | 2,225,290 | ||||||
Oil Insurance, Ltd. | 1,320,000 | 1,280,400 | ||||||
Pricoa Global Funding I | 2,135,000 | 2,096,021 | ||||||
Principal Life Global Funding II | 4,070,000 | 3,925,703 | ||||||
Protective Life Corp. | 1,640,000 | 2,206,393 | ||||||
Prudential Financial, Inc. | 1,760,000 | 1,790,976 | ||||||
Voya Financial, Inc. | 690,000 | 652,687 | ||||||
|
| |||||||
35,577,281 | ||||||||
|
| |||||||
Internet 0.2% |
| |||||||
Expedia Group, Inc. | ||||||||
3.80%, due 2/15/28 | 440,000 | 398,253 | ||||||
5.00%, due 2/15/26 | 60,000 | 60,233 | ||||||
Tencent Holdings, Ltd. (China) (b) | ||||||||
3.595%, due 1/19/28 | 1,475,000 | 1,353,074 | ||||||
3.925%, due 1/19/38 | 1,910,000 | 1,658,475 | ||||||
|
| |||||||
3,470,035 | ||||||||
|
| |||||||
Iron & Steel 0.3% |
| |||||||
ArcelorMittal | 2,300,000 | 2,545,164 | ||||||
Vale Overseas, Ltd. | 1,800,000 | 1,998,522 | ||||||
|
| |||||||
4,543,686 | ||||||||
|
| |||||||
Lodging 0.4% |
| |||||||
Marriott International, Inc. | ||||||||
2.30%, due 1/15/22 | 2,450,000 | 2,341,879 | ||||||
7.15%, due 12/1/19 | 1,900,000 | 1,970,644 | ||||||
MGM Resorts International | 80,000 | 80,600 |
Principal Amount | Value | |||||||
Lodging (continued) |
| |||||||
Sands China, Ltd. (Macao) (b) | ||||||||
4.60%, due 8/8/23 | $ | 810,000 | $ | 798,869 | ||||
5.125%, due 8/8/25 | 1,310,000 | 1,284,499 | ||||||
|
| |||||||
6,476,491 | ||||||||
|
| |||||||
Machinery—Diversified 0.4% |
| |||||||
CNH Industrial Capital LLC | ||||||||
4.20%, due 1/15/24 | 1,435,000 | 1,420,040 | ||||||
4.875%, due 4/1/21 | 3,945,000 | 4,030,407 | ||||||
John Deere Capital Corp. | 610,000 | 612,179 | ||||||
|
| |||||||
6,062,626 | ||||||||
|
| |||||||
Media 1.0% |
| |||||||
Comcast Corp. | ||||||||
3.45%, due 10/1/21 | 5,085,000 | 5,082,577 | ||||||
5.70%, due 7/1/19 | 4,250,000 | 4,324,842 | ||||||
Grupo Televisa S.A.B. | 1,500,000 | 1,597,035 | ||||||
NBC Universal Media LLC | 160,000 | 164,356 | ||||||
Sky PLC | 950,000 | 938,485 | ||||||
Time Warner Entertainment Co., L.P. | 800,000 | 922,006 | ||||||
UPCB Finance IV, Ltd. | 2,050,000 | 1,994,650 | ||||||
|
| |||||||
15,023,951 | ||||||||
|
| |||||||
Metal Fabricate & Hardware 0.3% |
| |||||||
Precision Castparts Corp. | 4,040,000 | 3,881,747 | ||||||
|
| |||||||
Mining 0.4% |
| |||||||
Anglo American Capital PLC | 1,295,000 | 1,276,617 | ||||||
FMG Resources (August 2006) Pty, Ltd. | 2,280,000 | 2,166,000 | ||||||
Teck Resources, Ltd. | 2,060,000 | 2,013,650 | ||||||
|
| |||||||
5,456,267 | ||||||||
|
| |||||||
Miscellaneous—Manufacturing 0.3% |
| |||||||
Siemens Financieringsmaatschappij N.V. | 2,130,000 | 2,071,039 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Miscellaneous—Manufacturing (continued) |
| |||||||
Textron Financial Corp. | $ | 3,540,000 | $ | 3,026,700 | ||||
|
| |||||||
5,097,739 | ||||||||
|
| |||||||
Oil & Gas 0.9% |
| |||||||
Cenovus Energy, Inc. | 955,000 | 900,292 | ||||||
Gazprom Via Gaz Capital S.A. | 2,065,000 | 2,275,361 | ||||||
Marathon Petroleum Corp. | 1,260,000 | 1,293,074 | ||||||
Petrobras Global Finance B.V. | 4,120,000 | 4,269,762 | ||||||
Valero Energy Corp. | ||||||||
6.125%, due 2/1/20 | 2,385,000 | 2,465,479 | ||||||
6.625%, due 6/15/37 | 2,645,000 | 3,028,712 | ||||||
|
| |||||||
14,232,680 | ||||||||
|
| |||||||
Packaging & Containers 0.2% |
| |||||||
Crown Americas LLC / Crown Americas Capital Corp. IV | 1,400,000 | 1,372,000 | ||||||
Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC | 1,938,215 | 1,938,215 | ||||||
|
| |||||||
3,310,215 | ||||||||
|
| |||||||
Pharmaceuticals 0.5% |
| |||||||
Allergan Funding SCS | ||||||||
2.45%, due 6/15/19 | 1,790,000 | 1,786,556 | ||||||
3.45%, due 3/15/22 | 2,715,000 | 2,669,972 | ||||||
GlaxoSmithKline Capital PLC | 3,465,000 | 3,471,760 | ||||||
|
| |||||||
7,928,288 | ||||||||
|
| |||||||
Pipelines 0.9% |
| |||||||
Andeavor Logistics, L.P. / Tesoro Logistics Finance Corp. | 1,845,000 | 1,879,944 | ||||||
Columbia Pipeline Group, Inc. | 2,995,000 | 2,982,643 | ||||||
MPLX, L.P. | ||||||||
4.875%, due 6/1/25 | 100,000 | 101,949 | ||||||
5.50%, due 2/15/23 | 1,975,000 | 2,001,260 | ||||||
Southern Natural Gas Co. LLC | 880,000 | 833,399 | ||||||
Spectra Energy Partners, L.P. | 1,740,000 | 1,766,281 |
Principal Amount | Value | |||||||
Pipelines (continued) |
| |||||||
Targa Resources Partners, L.P. / Targa Resources Partners Finance Corp. | $ | 2,120,000 | $ | 2,114,700 | ||||
Transcontinental Gas Pipe Line Co. LLC | 2,340,000 | 2,182,989 | ||||||
|
| |||||||
13,863,165 | ||||||||
|
| |||||||
Real Estate Investment Trusts 1.1% |
| |||||||
American Tower Corp. | 2,945,000 | 2,705,296 | ||||||
Crown Castle International Corp. | ||||||||
3.40%, due 2/15/21 | 2,080,000 | 2,066,807 | ||||||
5.25%, due 1/15/23 | 3,510,000 | 3,660,334 | ||||||
Digital Realty Trust, L.P. | ||||||||
2.75%, due 2/1/23 | 140,000 | 133,727 | ||||||
3.70%, due 8/15/27 | 500,000 | 467,453 | ||||||
Essex Portfolio, L.P. | 1,490,000 | 1,399,804 | ||||||
Iron Mountain, Inc. | 1,860,000 | 1,655,400 | ||||||
Kilroy Realty, L.P. | 2,060,000 | 1,957,110 | ||||||
UDR, Inc. | 2,000,000 | 1,876,370 | ||||||
Welltower, Inc. | 890,000 | 867,980 | ||||||
|
| |||||||
16,790,281 | ||||||||
|
| |||||||
Retail 0.7% |
| |||||||
Alimentation Couche-Tard, Inc. | 2,700,000 | 2,495,855 | ||||||
CVS Health Corp. | ||||||||
4.00%, due 12/5/23 | 3,725,000 | 3,703,736 | ||||||
4.78%, due 3/25/38 | 1,110,000 | 1,068,054 | ||||||
CVS Pass-Through Trust | 158,972 | 164,247 | ||||||
McDonald’s Corp. | 2,875,000 | 2,827,512 | ||||||
|
| |||||||
10,259,404 | ||||||||
|
| |||||||
Semiconductors 0.1% |
| |||||||
NXP B.V. / NXP Funding LLC | 1,610,000 | 1,599,938 | ||||||
|
| |||||||
Software 0.6% |
| |||||||
MSCI, Inc. | 3,610,000 | 3,709,275 | ||||||
PTC, Inc. | 1,415,000 | 1,446,838 |
18 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Software (continued) |
| |||||||
salesforce.com, Inc. |
| |||||||
3.25%, due 4/11/23 | $ | 1,300,000 | $ | 1,285,656 | ||||
3.70%, due 4/11/28 | 1,915,000 | 1,869,571 | ||||||
|
| |||||||
8,311,340 | ||||||||
|
| |||||||
Telecommunications 2.0% |
| |||||||
AT&T, Inc. | ||||||||
3.514% (3 Month LIBOR + 1.18%), due 6/12/24 (a) | 2,005,000 | 2,010,562 | ||||||
4.90%, due 8/15/37 (b) | 1,840,000 | 1,687,861 | ||||||
CommScope Technologies LLC | 850,000 | 826,625 | ||||||
CommScope, Inc. | 3,090,000 | 3,079,957 | ||||||
Crown Castle Towers LLC | 2,680,000 | 2,677,400 | ||||||
Hughes Satellite Systems Corp. | 990,000 | 1,003,712 | ||||||
Rogers Communications, Inc. | 1,495,000 | 1,442,129 | ||||||
Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint Spectrum Co. III LLC (b) | ||||||||
3.36%, due 3/20/23 | 4,012,500 | 3,972,375 | ||||||
4.738%, due 9/20/29 | 2,625,000 | 2,621,719 | ||||||
Telecom Italia Capital S.A. (Italy) | ||||||||
7.175%, due 6/18/19 | 1,930,000 | 1,961,362 | ||||||
7.721%, due 6/4/38 | 1,385,000 | 1,402,312 | ||||||
Telecom Italia S.p.A. | 1,110,000 | 1,046,175 | ||||||
Telefonica Emisiones SAU (Spain) | ||||||||
5.134%, due 4/27/20 | 2,425,000 | 2,482,692 | ||||||
5.462%, due 2/16/21 | 395,000 | 410,220 | ||||||
Verizon Communications, Inc. | 2,705,000 | 2,718,937 | ||||||
|
| |||||||
29,344,038 | ||||||||
|
| |||||||
Textiles 0.3% |
| |||||||
Cintas Corp. No 2 | 4,335,000 | 4,180,599 | ||||||
|
| |||||||
Transportation 0.1% |
| |||||||
XPO Logistics, Inc. | 761,000 | 780,025 | ||||||
|
| |||||||
Total Corporate Bonds | 530,771,169 | |||||||
|
|
Principal Amount | Value | |||||||
Foreign Bonds 0.1% |
| |||||||
Banks 0.1% |
| |||||||
Barclays Bank PLC | GBP | 1,186,000 | $ | 1,784,571 | ||||
|
| |||||||
Total Foreign Bonds | 1,784,571 | |||||||
|
| |||||||
Loan Assignments 6.2% (a) |
| |||||||
Advertising 0.1% |
| |||||||
Outfront Media Capital LLC | $ | 2,200,000 | 2,200,000 | |||||
|
| |||||||
Building Materials 0.3% |
| |||||||
Builders FirstSource, Inc. | 1,768,342 | 1,749,553 | ||||||
Quikrete Holdings, Inc. | 2,399,038 | 2,389,186 | ||||||
|
| |||||||
4,138,739 | ||||||||
|
| |||||||
Chemicals 0.2% |
| |||||||
Axalta Coating Systems U.S. Holdings, Inc. | 2,431,531 | 2,423,427 | ||||||
|
| |||||||
Commercial Services 0.3% |
| |||||||
Allied Universal Holdco LLC | 2,511,366 | 2,498,809 | ||||||
Global Payments Inc. | 1,319,900 | 1,319,350 | ||||||
|
| |||||||
3,818,159 | ||||||||
|
| |||||||
Computers 0.2% |
| |||||||
Tempo Acquisition LLC | 2,419,375 | 2,417,106 | ||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Loan Assignments (continued) |
| |||||||
Containers, Packaging & Glass 0.2% |
| |||||||
BWAY Holding Co. | $ | 2,799,563 | $ | 2,781,192 | ||||
Reynolds Group Holdings, Inc. | 857,538 | 857,672 | ||||||
|
| |||||||
3,638,864 | ||||||||
|
| |||||||
Electrical Components & Equipment 0.1% |
| |||||||
Electro Rent Corp. | 2,073,075 | 2,088,623 | ||||||
|
| |||||||
Electronics 0.1% |
| |||||||
Vantiv LLC | 2,228,800 | 2,223,228 | ||||||
|
| |||||||
Entertainment 0.1% |
| |||||||
Scientific Games International, Inc. | ||||||||
2018 Term Loan B5 | 1,466,480 | 1,451,815 | ||||||
2018 Term Loan B5 | 349,818 | 346,320 | ||||||
|
| |||||||
1,798,135 | ||||||||
|
| |||||||
Environmental Controls 0.5% |
| |||||||
Advanced Disposal Services, Inc. Term Loan B3 | 4,268,724 | 4,265,168 | ||||||
GFL Environmental, Inc. (Canada) | ||||||||
2018 Term Loan B | 3,056,676 | 3,012,736 | ||||||
2018 Delayed Draw Term Loan | 380,663 | 375,191 | ||||||
|
| |||||||
7,653,095 | ||||||||
|
| |||||||
Food & Staples Retailing 0.3% |
| |||||||
U.S. Foods, Inc. | 5,195,413 | 5,184,279 | ||||||
|
|
Principal Amount | Value | |||||||
Health Care—Products 0.4% |
| |||||||
Ortho-Clinical Diagnostics S.A. | $ | 2,229,007 | $ | 2,219,719 | ||||
Sotera Health Holdings LLC | 3,004,250 | 3,004,250 | ||||||
|
| |||||||
5,223,969 | ||||||||
|
| |||||||
Healthcare, Education & Childcare 0.3% |
| |||||||
ExamWorks Group, Inc. | 3,587,074 | 3,596,042 | ||||||
U.S. Renal Care, Inc. | 1,700,000 | 1,627,750 | ||||||
|
| |||||||
5,223,792 | ||||||||
|
| |||||||
Hotels, Motels, Inns & Gaming 0.3% |
| |||||||
Las Vegas Sands LLC | 3,771,050 | 3,756,052 | ||||||
|
| |||||||
Household Products & Wares 0.6% |
| |||||||
KIK Custom Products, Inc. | 7,110,294 | 7,072,524 | ||||||
Prestige Brands, Inc. Term Loan B5 | 1,380,838 | 1,381,331 | ||||||
|
| |||||||
8,453,855 | ||||||||
|
| |||||||
Insurance 0.2% |
| |||||||
MPH Acquisition Holdings LLC | 3,603,602 | 3,592,903 | ||||||
|
| |||||||
Machinery—Diversified 0.1% |
| |||||||
Titan Acquisition, Ltd. | 2,189,000 | 2,057,660 | ||||||
|
| |||||||
Media 0.3% |
| |||||||
Nielsen Finance LLC Term Loan B4 | 876,650 | 871,719 |
20 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Loan Assignments (continued) |
| |||||||
Media (continued) |
| |||||||
Virgin Media Bristol LLC | $ | 3,650,000 | $ | 3,646,091 | ||||
|
| |||||||
4,517,810 | ||||||||
|
| |||||||
Packaging & Containers 0.6% |
| |||||||
Albea Beauty Holdings SA | 2,313,375 | 2,304,700 | ||||||
Berry Global, Inc. Term Loan Q | 6,288,468 | 6,282,569 | ||||||
|
| |||||||
8,587,269 | ||||||||
|
| |||||||
Software 0.2% |
| |||||||
First Data Corp. | 2,490,979 | 2,485,204 | ||||||
|
| |||||||
Telecommunications 0.7% |
| |||||||
Level 3 Financing, Inc. | 10,000,000 | 10,000,000 | ||||||
|
| |||||||
Transportation 0.1% |
| |||||||
XPO Logistics, Inc. | 1,575,000 | 1,577,188 | ||||||
|
| |||||||
Total Loan Assignments | 93,059,357 | |||||||
|
| |||||||
Mortgage-Backed Securities 0.7% |
| |||||||
Commercial Mortgage Loans |
| |||||||
Bayview Commercial Asset Trust | 104,783 | 100,782 | ||||||
BX Commercial Mortgage Trust | 2,540,000 | 2,538,371 | ||||||
Four Times Square Trust | 822,530 | 852,322 |
Principal Amount | Value | |||||||
Commercial Mortgage Loans |
| |||||||
Wells Fargo Commercial Mortgage Trust (b)(i) | ||||||||
Series 2018-1745, Class A | $ | 3,150,000 | $ | 3,080,118 | ||||
Series 2018-AUS, Class A | 3,000,000 | 2,984,593 | ||||||
|
| |||||||
9,556,186 | ||||||||
|
| |||||||
Residential Mortgage (Collateralized Mortgage Obligation) 0.0%‡ |
| |||||||
Mortgage Equity Conversion Asset Trust | 398,177 | 370,209 | ||||||
|
| |||||||
Total Mortgage-Backed Securities | 9,926,395 | |||||||
|
| |||||||
U.S. Government & Federal Agencies 9.8% |
| |||||||
Federal Home Loan Mortgage Corporation |
| |||||||
3.00%, due 12/1/47 | 6,500,000 | 6,152,226 | ||||||
3.50%, due 2/1/48 | 12,151,378 | 11,834,555 | ||||||
6.50%, due 2/1/27 | 20 | 22 | ||||||
6.50%, due 5/1/29 | 18,931 | 20,843 | ||||||
6.50%, due 6/1/29 | 3,700 | 4,073 | ||||||
6.50%, due 7/1/29 | 22,104 | 24,335 | ||||||
6.50%, due 8/1/29 | 7,598 | 8,365 | ||||||
6.50%, due 9/1/29 | 483 | 532 | ||||||
6.50%, due 6/1/32 | 1,933 | 2,129 | ||||||
6.50%, due 1/1/37 | 1,793 | 1,983 | ||||||
7.00%, due 9/1/26 | 3,097 | 3,251 | ||||||
7.00%, due 7/1/32 | 8,381 | 9,357 | ||||||
7.50%, due 5/1/32 | 4,269 | 4,459 | ||||||
|
| |||||||
18,066,130 | ||||||||
|
| |||||||
Federal National Mortgage Association |
| |||||||
4.00%, due 4/1/48 | 17,333,753 | 17,402,013 | ||||||
4.00%, due 5/1/48 TBA (j) | 5,400,000 | 5,399,789 | ||||||
4.50%, due 7/1/20 | 425 | 430 | ||||||
4.50%, due 3/1/21 | 1,126 | 1,142 | ||||||
4.50%, due 11/1/48 TBA (j) | 20,500,000 | 20,988,353 | ||||||
7.00%, due 10/1/37 | 373 | 421 | ||||||
7.00%, due 11/1/37 | 15,186 | 16,784 | ||||||
|
| |||||||
43,808,932 | ||||||||
|
| |||||||
Government National Mortgage Association |
| |||||||
3.50%, due 8/20/47 | 8,753,460 | 8,603,716 | ||||||
5.00%, due 12/15/37 | 953 | 993 | ||||||
5.50%, due 9/15/35 | 4,186 | 4,450 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
U.S. Government & Federal Agencies (continued) |
| |||||||
Government National Mortgage Association |
| |||||||
6.50%, due 4/15/29 | $ | 12 | $ | 13 | ||||
6.50%, due 8/15/29 | 9 | 9 | ||||||
6.50%, due 10/15/31 | 1,826 | 2,037 | ||||||
7.00%, due 12/15/25 | 2,912 | 2,924 | ||||||
7.00%, due 11/15/27 | 5,898 | 6,193 | ||||||
7.00%, due 12/15/27 | 27,493 | 29,068 | ||||||
7.50%, due 6/15/26 | 262 | 277 | ||||||
7.50%, due 10/15/30 | 14,557 | 14,910 | ||||||
8.00%, due 10/15/26 | 2,424 | 2,461 | ||||||
8.50%, due 11/15/26 | 16,574 | 16,708 | ||||||
|
| |||||||
8,683,759 | ||||||||
|
| |||||||
United States Treasury Bonds 2.7% |
| |||||||
2.75%, due 11/15/47 | 2,080,000 | 1,828,775 | ||||||
3.00%, due 2/15/47 | 2,800,000 | 2,595,578 | ||||||
3.125%, due 5/15/48 | 9,125,000 | 8,653,779 | ||||||
3.75%, due 11/15/43 | 5,715,000 | 6,051,649 | ||||||
4.375%, due 11/15/39 | 17,870,000 | 20,660,792 | ||||||
|
| |||||||
39,790,573 | ||||||||
|
| |||||||
United States Treasury Notes 2.4% |
| |||||||
1.75%, due 5/15/23 | 2,785,000 | 2,640,093 | ||||||
2.875%, due 10/31/23 | 9,000,000 | 8,953,242 | ||||||
2.875%, due 8/15/28 | 24,960,000 | 24,368,175 | ||||||
|
| |||||||
35,961,510 | ||||||||
|
| |||||||
Total U.S. Government & Federal Agencies |
| 146,310,904 | ||||||
|
| |||||||
Total Long-Term Bonds | 790,240,277 | |||||||
|
| |||||||
Shares | ||||||||
Common Stocks 44.5% |
| |||||||
Aerospace & Defense 0.8% |
| |||||||
BAE Systems PLC (United Kingdom) | 1,081,044 | 7,265,456 | ||||||
Lockheed Martin Corp. | 15,390 | 4,522,351 | ||||||
|
| |||||||
11,787,807 | ||||||||
|
| |||||||
Air Freight & Logistics 0.6% |
| |||||||
Deutsche Post A.G., Registered (Germany) | 152,413 | 4,825,026 | ||||||
United Parcel Service, Inc., Class B | 43,688 | 4,654,520 | ||||||
|
| |||||||
9,479,546 | ||||||||
|
| |||||||
Auto Components 0.3% |
| |||||||
Cie Generale des Etablissements Michelin SCA (France) | 38,227 | 3,928,845 | ||||||
|
|
Shares | Value | |||||||
Banks 2.4% |
| |||||||
BB&T Corp. | 72,979 | $ | 3,587,648 | |||||
Commonwealth Bank of Australia (Australia) | 85,143 | 4,174,155 | ||||||
Lloyds Banking Group PLC (United Kingdom) | 7,091,204 | 5,186,409 | ||||||
People’s United Financial, Inc. | 244,258 | 3,825,080 | ||||||
Royal Bank of Canada (Canada) | 66,430 | 4,840,264 | ||||||
Svenska Handelsbanken A.B., Class A (Sweden) | 402,878 | 4,382,233 | ||||||
Wells Fargo & Co. | 74,770 | 3,980,007 | ||||||
Westpac Banking Corp. (Australia) | 281,741 | 5,356,976 | ||||||
|
| |||||||
35,332,772 | ||||||||
|
| |||||||
Beverages 0.9% |
| |||||||
Coca-Cola Co. | 101,443 | 4,857,091 | ||||||
Diageo PLC (United Kingdom) | 104,008 | 3,600,763 | ||||||
PepsiCo., Inc. | 45,922 | 5,160,714 | ||||||
|
| |||||||
13,618,568 | ||||||||
|
| |||||||
Biotechnology 0.3% |
| |||||||
AbbVie, Inc. | 53,393 | 4,156,645 | ||||||
|
| |||||||
Capital Markets 1.0% |
| |||||||
BlackRock, Inc. | 8,264 | 3,399,975 | ||||||
CME Group, Inc. | 22,588 | 4,139,025 | ||||||
Macquarie Group, Ltd. (Australia) | 41,702 | 3,461,065 | ||||||
Singapore Exchange, Ltd. (Singapore) | 691,786 | 3,416,104 | ||||||
|
| |||||||
14,416,169 | ||||||||
|
| |||||||
Chemicals 1.3% |
| |||||||
BASF S.E. (Germany) | 76,206 | 5,871,992 | ||||||
DowDuPont, Inc. | 73,972 | 3,988,570 | ||||||
LyondellBasell Industries N.V., Class A | 41,918 | 3,742,020 | ||||||
Nutrien, Ltd. (Canada) | 112,448 | 5,951,873 | ||||||
|
| |||||||
19,554,455 | ||||||||
|
| |||||||
Commercial Services & Supplies 0.0%‡ |
| |||||||
Quad/Graphics, Inc. | 10 | 154 | ||||||
|
| |||||||
Communications Equipment 0.6% |
| |||||||
Cisco Systems, Inc. | 214,719 | 9,823,394 | ||||||
|
| |||||||
Construction & Engineering 0.4% |
| |||||||
Vinci S.A. (France) | 61,064 | 5,455,669 | ||||||
|
| |||||||
Diversified Telecommunication Services 3.9% |
| |||||||
AT&T, Inc. | 325,182 | 9,976,584 | ||||||
BCE, Inc. (Canada) | 282,146 | 10,919,776 | ||||||
CenturyLink, Inc. | 247,982 | 5,118,348 | ||||||
Deutsche Telekom A.G., Registered (Germany) | 601,214 | 9,870,591 |
22 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Diversified Telecommunication Services (continued) |
| |||||||
Singapore Telecommunications, Ltd. (Singapore) | 1,569,515 | $ | 3,580,552 | |||||
TELUS Corp. (Canada) | 157,091 | 5,379,363 | ||||||
Verizon Communications, Inc. | 247,982 | 14,157,292 | ||||||
|
| |||||||
59,002,506 | ||||||||
|
| |||||||
Electric Utilities 4.4% |
| |||||||
American Electric Power Co., Inc. | 75,213 | 5,517,626 | ||||||
Duke Energy Corp. | 138,760 | 11,465,739 | ||||||
Entergy Corp. | 101,526 | 8,523,108 | ||||||
FirstEnergy Corp. | 176,988 | 6,598,113 | ||||||
PPL Corp. | 245,003 | 7,448,091 | ||||||
Red Electrica Corp. S.A. (Spain) | 320,962 | 6,652,740 | ||||||
Southern Co. | 106,987 | 4,817,624 | ||||||
SSE PLC (United Kingdom) | 301,103 | 4,393,290 | ||||||
Terna Rete Elettrica Nazionale S.p.A. (Italy) | 1,942,404 | 10,043,295 | ||||||
|
| |||||||
65,459,626 | ||||||||
|
| |||||||
Electrical Equipment 0.8% |
| |||||||
Eaton Corp. PLC | 108,228 | 7,756,701 | ||||||
Emerson Electric Co. | 64,291 | 4,364,073 | ||||||
|
| |||||||
12,120,774 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts 1.9% |
| |||||||
Iron Mountain, Inc. | 199,825 | 6,116,643 | ||||||
Public Storage | 20,354 | 4,182,137 | ||||||
Unibail-Rodamco-Westfield (France) (k) | 40,958 | 7,435,564 | ||||||
Welltower, Inc. | 153,902 | 10,168,305 | ||||||
|
| |||||||
27,902,649 | ||||||||
|
| |||||||
Food Products 1.1% |
| |||||||
Kraft Heinz Co. | 78,277 | 4,302,887 | ||||||
Nestle S.A., Registered (Switzerland) | 83,157 | 7,028,073 | ||||||
Orkla ASA (Norway) | 615,363 | 5,309,913 | ||||||
|
| |||||||
16,640,873 | ||||||||
|
| |||||||
Gas Utilities 0.3% |
| |||||||
Naturgy Energy Group S.A. (Spain) (l) | 195,357 | 4,806,010 | ||||||
|
| |||||||
Health Care Providers & Services 0.2% |
| |||||||
Sonic Healthcare, Ltd. (Australia) | 203,052 | 3,242,494 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure 0.7% |
| |||||||
Las Vegas Sands Corp. | 91,597 | 4,674,195 | ||||||
McDonald’s Corp. | 33,511 | 5,928,096 | ||||||
|
| |||||||
10,602,291 | ||||||||
|
| |||||||
Household Durables 0.3% |
| |||||||
Leggett & Platt, Inc. | 127,590 | 4,632,793 | ||||||
|
|
Shares | Value | |||||||
Household Products 0.7% |
| |||||||
Kimberly-Clark Corp. | 51,880 | $ | 5,411,084 | |||||
Procter & Gamble Co. | 58,582 | 5,195,052 | ||||||
|
| |||||||
10,606,136 | ||||||||
|
| |||||||
Industrial Conglomerates 0.3% |
| |||||||
Siemens A.G., Registered (Germany) | 36,986 | 4,261,275 | ||||||
|
| |||||||
Insurance 3.8% |
| |||||||
Allianz S.E., Registered (Germany) | 54,610 | 11,408,358 | ||||||
Arthur J. Gallagher & Co. | 58,830 | 4,354,008 | ||||||
Assicurazioni Generali S.p.A. (Italy) | 272,467 | 4,406,949 | ||||||
AXA S.A. (France) | 501,602 | 12,578,613 | ||||||
MetLife, Inc. | 191,381 | 7,882,983 | ||||||
Muenchener Rueckversicherungs-Gesellschaft A.G., Registered (Germany) | 53,866 | 11,589,105 | ||||||
SCOR S.E. (France) | 114,670 | 5,308,237 | ||||||
|
| |||||||
57,528,253 | ||||||||
|
| |||||||
Media 0.0%‡ |
| |||||||
ION Media Networks, Inc. 3/12/10 (f)(g)(h)(k)(m) | 12 | 7,431 | ||||||
|
| |||||||
Multi-Utilities 1.8% |
| |||||||
Ameren Corp. | 83,653 | 5,402,311 | ||||||
Dominion Energy, Inc. | 114,186 | 8,155,164 | ||||||
National Grid PLC (United Kingdom) | 851,431 | 9,024,178 | ||||||
WEC Energy Group, Inc. | 76,951 | 5,263,449 | ||||||
|
| |||||||
27,845,102 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels 4.8% |
| |||||||
Chevron Corp. | 13,811 | 1,541,998 | ||||||
Enterprise Products Partners, L.P. | 313,267 | 8,401,821 | ||||||
Equinor ASA (Norway) | 166,314 | 4,326,634 | ||||||
Exxon Mobil Corp. | 103,760 | 8,267,597 | ||||||
Magellan Midstream Partners, L.P. | 88,618 | 5,465,958 | ||||||
Occidental Petroleum Corp. | 119,895 | 8,041,358 | ||||||
Pembina Pipeline Corp. (Canada) | 195,036 | 6,308,354 | ||||||
Royal Dutch Shell PLC, Class A, Sponsored ADR (Netherlands) | 173,513 | 10,964,286 | ||||||
Snam S.p.A. (Italy) | 1,614,243 | 6,680,875 | ||||||
TOTAL S.A. (France) | 199,825 | 11,760,203 | ||||||
|
| |||||||
71,759,084 | ||||||||
|
| |||||||
Personal Products 0.4% |
| |||||||
Unilever PLC (United Kingdom) | 129,576 | 6,867,603 | ||||||
|
| |||||||
Pharmaceuticals 4.4% |
| |||||||
AstraZeneca PLC, Sponsored ADR (United Kingdom) | 333,621 | 12,937,822 | ||||||
GlaxoSmithKline PLC (United Kingdom) | 586,817 | 11,335,053 | ||||||
Johnson & Johnson | 36,738 | 5,142,953 | ||||||
Merck & Co., Inc. | 83,653 | 6,157,697 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 23 |
Portfolio of Investments October 31, 2018 (continued)
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Pharmaceuticals (continued) |
| |||||||
Novartis A.G., Registered (Switzerland) | 88,121 | $ | 7,720,595 | |||||
Pfizer, Inc. | 228,868 | 9,855,056 | ||||||
Roche Holding A.G. (Switzerland) | 29,042 | 7,067,660 | ||||||
Sanofi (France) | 63,547 | 5,674,630 | ||||||
|
| |||||||
65,891,466 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 1.3% |
| |||||||
Intel Corp. | 99,044 | 4,643,183 | ||||||
QUALCOMM, Inc. | 74,469 | 4,683,355 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR (Taiwan) | 98,795 | 3,764,090 | ||||||
Texas Instruments, Inc. | 67,022 | 6,221,652 | ||||||
|
| |||||||
19,312,280 | ||||||||
|
| |||||||
Software 0.6% |
| |||||||
Micro Focus International PLC (United Kingdom) | 193,309 | 3,010,763 | ||||||
Microsoft Corp. | 52,624 | 5,620,769 | ||||||
|
| |||||||
8,631,532 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods 0.3% |
| |||||||
Hanesbrands, Inc. | 257,441 | 4,417,688 | ||||||
|
| |||||||
Tobacco 2.8% |
| |||||||
Altria Group, Inc. | 189,399 | 12,318,511 | ||||||
British American Tobacco PLC (United Kingdom) | 146,952 | 6,374,150 | ||||||
British American Tobacco PLC, Sponsored ADR (United Kingdom) | 70,001 | 3,038,043 | ||||||
Imperial Brands PLC (United Kingdom) | 315,252 | 10,690,401 | ||||||
Philip Morris International, Inc. | 104,753 | 9,225,597 | ||||||
|
| |||||||
41,646,702 | ||||||||
|
| |||||||
Wireless Telecommunication Services 1.1% |
| |||||||
Rogers Communications, Inc., Class B (Canada) | 153,139 | 7,885,824 | ||||||
Vodafone Group PLC (United Kingdom) | 4,247,722 | 8,025,797 | ||||||
|
| |||||||
15,911,621 | ||||||||
|
| |||||||
Total Common Stocks | 666,650,213 | |||||||
|
| |||||||
Short-Term Investment 3.1% |
| |||||||
Affiliated Investment Company 3.1% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.075% (n) | 47,219,123 | 47,219,123 | ||||||
|
| |||||||
Total Short-Term Investment | 47,219,123 | |||||||
|
| |||||||
Total Investments | 100.4 | % | 1,504,109,613 | |||||
Other Assets, Less Liabilities | (0.4 | ) | (6,761,672 | ) | ||||
Net Assets | 100.0 | % | $ | 1,497,347,941 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | Floating rate—Rate shown was the rate in effect as of October 31, 2018. |
(b) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(c) | Step coupon—Rate shown was the rate in effect as of October 31, 2018. |
(d) | Fixed to floating rate—Rate shown was the rate in effect as of October 31, 2018. |
(e) | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
(f) | Fair valued security—Represents fair value as measured in good faith under procedures approved by the Board of Trustees. As of October 31, 2018, the total market value of fair valued securities was $541,887, which represented less than one-tenth of a percent of the Fund’s net assets. |
(g) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(h) | Illiquid security—As of October 31, 2018, the total market value of these securities deemed illiquid under procedures approved by the Board of Trustees was $2,916,011, which represented 0.2% of the Fund’s net assets. (Unaudited) |
(i) | Collateral strip rate—A bond whose interest was based on the weighted net interest rate of the collateral. The coupon rate adjusts periodically based on a predetermined schedule. Rate shown was the rate in effect as of October 31, 2018. |
(j) | TBA—Securities purchased on a forward commitment basis with an approximate principal amount and maturity date. The actual principal amount and maturity date will be determined upon settlement. As of October 31, 2018, the total net market value of these securities was $26,388,142, which represented 1.8% of the Fund’s net assets. All or a portion of these securities are a part of a mortgage dollar roll agreement. |
(k) | Non-income producing security. |
(l) | All or a portion of this security was held on loan. As of October 31, 2018, the market value of securities loaned was $296,156 and the Fund received non-cash collateral in the form of U.S. Treasury securities with a value of $312,698 (See Note 2(M)). |
(m) | Restricted security. (See Note 2(N)) |
(n) | Current yield as of October 31, 2018. |
24 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Foreign Currency Forward Contracts
As of October 31, 2018, the Fund held the following foreign currency forward contracts1:
Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation (Depreciation) | ||||||||||||||
GBP | 40,110,000 | USD | 51,104,963 | JPMorgan Chase Bank | 11/1/18 | $ | 163,651 | |||||||||||
USD | 18,474,105 | CAD | 24,110,000 | JPMorgan Chase Bank | 11/1/18 | 159,699 | ||||||||||||
USD | 18,390,542 | CAD | 24,110,000 | JPMorgan Chase Bank | 2/1/19 | 41,848 | ||||||||||||
USD | 96,601,597 | EUR | 82,095,000 | JPMorgan Chase Bank | 11/1/18 | 3,616,667 | ||||||||||||
USD | 94,106,319 | EUR | 82,095,000 | JPMorgan Chase Bank | 2/1/19 | 337,818 | ||||||||||||
USD | 52,989,321 | GBP | 40,110,000 | JPMorgan Chase Bank | 11/1/18 | 1,720,707 | ||||||||||||
USD | 53,108,647 | JPY | 5,988,000,000 | JPMorgan Chase Bank | 11/1/18 | 40,007 | ||||||||||||
|
| |||||||||||||||||
Total unrealized appreciation | 6,080,397 | |||||||||||||||||
|
| |||||||||||||||||
CAD | 24,110,000 | USD | 18,355,539 | JPMorgan Chase Bank | 11/1/18 | (41,132 | ) | |||||||||||
EUR | 82,095,000 | USD | 93,309,177 | JPMorgan Chase Bank | 11/1/18 | (324,247 | ) | |||||||||||
JPY | 5,988,000,000 | USD | 54,367,169 | JPMorgan Chase Bank | 11/1/18 | (1,298,529 | ) | |||||||||||
JPY | 5,988,000,000 | USD | 53,542,688 | JPMorgan Chase Bank | 2/1/19 | (50,478 | ) | |||||||||||
USD | 51,212,000 | GBP | 40,000,000 | JPMorgan Chase Bank | 2/1/19 | (162,837 | ) | |||||||||||
|
| |||||||||||||||||
Total unrealized depreciation | (1,877,223 | ) | ||||||||||||||||
|
| |||||||||||||||||
Net unrealized appreciation | $ | 4,203,174 | ||||||||||||||||
|
|
1. | Foreign Currency Forward Contracts are subject to limitations such that they cannot be “sold or repurchased,” although the Fund would be able to exit the transaction through other means, such as through the execution of an offsetting transaction. |
Futures Contracts
As of October 31, 2018, the Fund held the following futures contracts1:
Type | Number of Contracts Long (Short) | Expiration Date | Value at Trade Date | Current Notional Amount | Unrealized Appreciation (Depreciation)2 | |||||||||||||||
5-Year United States Treasury Note | 718 | December 2018 | $ | 81,398,620 | $ | 80,690,860 | $ | (707,760 | ) | |||||||||||
10-Year United States Treasury Note | 435 | December 2018 | 52,343,686 | 51,520,313 | (823,373 | ) | ||||||||||||||
10-Year United States Treasury Ultra Note | (156 | ) | December 2018 | (19,992,018 | ) | (19,517,063 | ) | 474,955 | ||||||||||||
Nikkei 225 | 575 | December 2018 | 56,515,787 | 55,469,269 | (1,046,518 | ) | ||||||||||||||
S&P 500 Index Mini | 1,125 | December 2018 | 161,966,986 | 152,499,375 | (9,467,611 | ) | ||||||||||||||
United States Treasury Ultra Bond | 309 | December 2018 | 49,411,763 | 46,108,594 | (3,303,169 | ) | ||||||||||||||
|
|
|
|
|
| |||||||||||||||
$ | 381,644,824 | $ | 366,771,348 | $ | (14,873,476 | ) | ||||||||||||||
|
|
|
|
|
|
1. | As of October 31, 2018, cash in the amount of $11,667,987 was on deposit with a broker or futures commission merchant for futures transactions. |
2. | Represents the difference between the value of the contracts at the time they were opened and the value as of October 31, 2018. |
The following abbreviations are used in the preceding pages:
ADR—American Depositary Receipt
CAD—Canadian Dollar
EUR—Euro
GBP—British Pound Sterling
JPY—Japanese Yen
LIBOR—London Interbank Offered Rate
USD—United States Dollar
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 25 |
Portfolio of Investments October 31, 2018 (continued)
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets and liabilities:
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 8,387,881 | $ | — | $ | 8,387,881 | ||||||||
Corporate Bonds | — | 530,771,169 | — | 530,771,169 | ||||||||||||
Foreign Bonds | — | 1,784,571 | — | 1,784,571 | ||||||||||||
Loan Assignments (b) | — | 91,431,607 | 1,627,750 | 93,059,357 | ||||||||||||
Mortgage-Backed Securities (c) | — | 9,556,186 | 370,209 | 9,926,395 | ||||||||||||
U.S. Government & Federal Agencies | — | 146,310,904 | — | 146,310,904 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 788,242,318 | 1,997,959 | 790,240,277 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Common Stocks (d) | 666,642,782 | — | 7,431 | 666,650,213 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 47,219,123 | — | — | 47,219,123 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 713,861,905 | 788,242,318 | 2,005,390 | 1,504,109,613 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (e) | — | 6,080,397 | — | 6,080,397 | ||||||||||||
Futures Contracts (e) | 474,955 | — | — | 474,955 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | 474,955 | 6,080,397 | — | 6,555,352 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities and Other Financial Instruments | $ | 714,336,860 | $ | 794,322,715 | $ | 2,005,390 | $ | 1,510,664,965 | ||||||||
|
|
|
|
|
|
|
|
Liability Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Foreign Currency Forward Contracts (e) | $ | — | $ | (1,877,223 | ) | $ | — | $ | (1,877,223 | ) | ||||||
Futures Contracts (e) | (15,348,431 | ) | — | — | (15,348,431 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments | $ | (15,348,431 | ) | $ | (1,877,223 | ) | $ | — | $ | (17,225,654 | ) | |||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
(b) | The Level 3 security valued at $1,627,750 is held in Healthcare, Education & Childcare within the Loan Assignments section of the Portfolio of Investments. |
(c) | The Level 3 security valued at $370,209 is held in Residential Mortgage (Collateralized Mortgage Obligation) within the Mortgage-Backed Securities section of the Portfolio of Investments. |
(d) | The Level 3 security valued at $7,431 is held in Media within the Common Stocks section of the Portfolio of Investments. |
(e) | The value listed for these securities reflects unrealized appreciation (depreciation) as shown on the Portfolio of Investments. |
26 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments in Securities | Balance as of October 31, 2017 | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Purchases | Sales (a) | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of October 31, 2018 | Change in Unrealized Appreciation (Depreciation) from Investments Still Held at October 31, 2018 (b) | ||||||||||||||||||||||||||||||
Long-Term Bonds | ||||||||||||||||||||||||||||||||||||||||
Loan Assignments | ||||||||||||||||||||||||||||||||||||||||
Electrical Components & Equipment | $ | 2,120,352 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (2,120,352 | ) | $ | — | $ | — | |||||||||||||||||||
Healthcare, Education & Childcare | — | 4,254 | — | (25,504 | ) | — | — | 1,649,000 | — | 1,627,750 | (25,504 | ) | ||||||||||||||||||||||||||||
Iron & Steel | 6,512,944 | (1,300 | ) | 11,927 | (59,110 | ) | — | (6,464,461 | ) | — | — | — | — | |||||||||||||||||||||||||||
Mortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||||||
Residential Mortgages (Collateralized Mortgage Obligations) | 378,967 | — | — | 38,562 | — | (47,320 | ) | — | — | 370,209 | 38,562 | |||||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||||||||||
Media | 8,143 | — | — | (712 | ) | — | — | — | — | 7,431 | (712 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 9,020,406 | $ | 2,954 | $ | 11,927 | $ | (46,764 | ) | $ | — | $ | (6,511,781 | ) | $ | 1,649,000 | $ | (2,120,352 | ) | $ | 2,005,390 | $ | 12,346 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Sales include principal reductions. |
(b) | Included in "Net change in unrealized appreciation (depreciation) on investments" in the Statement of Operations. |
In the year ended October 31, 2018, a loan assignment with a market value of $1,649,000 transferred from Level 2 to Level 3 as the fair value obtained by an independent pricing service, utilized significant unobservable inputs. As of October 31, 2017, the fair value obtained for this loan assignment, as determined by an independent pricing service, utilized significant other observable inputs.
In the year ended October 31, 2018, a loan assignment with a market value of $2,120,352 transferred from Level 3 to Level 2 as the fair value obtained from an independent pricing service, utilized significant other observable inputs. As of October 31, 2017, the fair value obtained for this loan assignment, as determined by an independent pricing service, utilized significant unobservable inputs.
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 27 |
Statement of Assets and Liabilities as of October 31, 2018
Assets | ||||
Investment in securities, at value | $ | 1,456,890,490 | ||
Investment in affiliated investment companies, at value (identified cost $47,219,123) | 47,219,123 | |||
Cash collateral on deposit at broker for futures contracts | 11,667,987 | |||
Cash | 82,144 | |||
Cash denominated in foreign currencies (identified cost $82,952) | 80,770 | |||
Receivables: | ||||
Dividends and interest | 9,129,974 | |||
Investment securities sold | 7,193,242 | |||
Variation margin on futures contracts | 1,209,986 | |||
Fund shares sold | 1,079,830 | |||
Securities lending income | 462 | |||
Unrealized appreciation on foreign currency forward contracts | 6,080,397 | |||
Other assets | 53,638 | |||
|
| |||
Total assets | 1,540,688,043 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 36,830,627 | |||
Fund shares redeemed | 2,670,337 | |||
Manager (See Note 3) | 801,253 | |||
NYLIFE Distributors (See Note 3) | 354,688 | |||
Transfer agent (See Note 3) | 341,381 | |||
Shareholder communication | 80,750 | |||
Custodian | 43,505 | |||
Professional fees | 27,535 | |||
Trustees | 3,819 | |||
Accrued expenses | 16,054 | |||
Unrealized depreciation on foreign currency forward contracts | 1,877,223 | |||
Dividend payable | 181,452 | |||
Interest expense and fees payable | 111,478 | |||
|
| |||
Total liabilities | 43,340,102 | |||
|
| |||
Net assets | $ | 1,497,347,941 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 805,312 | ||
Additional paid-in capital | 1,474,575,916 | |||
|
| |||
1,475,381,228 | ||||
Total distributable earnings (loss) | 21,966,713 | |||
|
| |||
Net assets | $ | 1,497,347,941 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 571,205,968 | ||
|
| |||
Shares of beneficial interest outstanding | 30,861,523 | |||
|
| |||
Net asset value per share outstanding | $ | 18.51 | ||
Maximum sales charge (5.50% of offering price) | 1.08 | |||
|
| |||
Maximum offering price per share outstanding | $ | 19.59 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 85,132,213 | ||
|
| |||
Shares of beneficial interest outstanding | 4,596,096 | |||
|
| |||
Net asset value per share outstanding | $ | 18.52 | ||
Maximum sales charge (5.50% of offering price) | 1.08 | |||
|
| |||
Maximum offering price per share outstanding | $ | 19.60 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 30,342,609 | ||
|
| |||
Shares of beneficial interest outstanding | 1,628,080 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.64 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 212,399,988 | ||
|
| |||
Shares of beneficial interest outstanding | 11,418,234 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.60 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 499,674,863 | ||
|
| |||
Shares of beneficial interest outstanding | 26,748,189 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.68 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 3,587,449 | ||
|
| |||
Shares of beneficial interest outstanding | 193,965 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.50 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 136,320 | ||
|
| |||
Shares of beneficial interest outstanding | 7,364 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.51 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 94,868,531 | ||
|
| |||
Shares of beneficial interest outstanding | 5,077,761 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 18.68 | ||
|
|
28 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) | ||||
Income | ||||
Interest | $ | 32,763,496 | ||
Dividends—Unaffiliated (a) | 30,198,434 | |||
Dividends—Affiliated | 416,627 | |||
Securities lending | 180,383 | |||
Other | 5,766 | |||
|
| |||
Total income | 63,564,706 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 10,448,819 | |||
Distribution/Service—Class A (See Note 3) | 1,556,218 | |||
Distribution/Service—Investor Class (See Note 3) | 224,659 | |||
Distribution/Service—Class B (See Note 3) | 352,000 | |||
Distribution/Service—Class C (See Note 3) | 2,486,796 | |||
Distribution/Service—Class R2 (See Note 3) | 9,866 | |||
Distribution/Service—Class R3 (See Note 3) | 648 | |||
Transfer agent (See Note 3) | 2,161,326 | |||
Shareholder communication | 187,394 | |||
Professional fees | 166,330 | |||
Registration | 156,315 | |||
Custodian | 97,102 | |||
Trustees | 37,438 | |||
Interest expense | 32,005 | |||
Shareholder service (See Note 3) | 4,076 | |||
Miscellaneous | 71,217 | |||
|
| |||
Total expenses before waiver/reimbursement | 17,992,209 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (35,031 | ) | ||
|
| |||
Net expenses | 17,957,178 | |||
|
| |||
Net investment income (loss) | 45,607,528 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts and Foreign Currency Transactions |
| |||
Net realized gain (loss) on: | ||||
Investment transactions | 20,268,685 | |||
Futures transactions | 33,164,364 | |||
Foreign currency forward transactions | 1,760,171 | |||
Foreign currency transactions | 411,934 | |||
|
| |||
Net realized gain (loss) on investments, futures transactions and foreign currency transactions | 55,605,154 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (110,759,007 | ) | ||
Futures contracts | (33,225,973 | ) | ||
Foreign currency forward contracts | 4,069,606 | |||
Translation of other assets and liabilities in foreign currencies | (533,394 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments, futures contracts and foreign currency transactions | (140,448,768 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments, futures transactions and foreign currency transactions | (84,843,614 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (39,236,086 | ) | |
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $1,858,960. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 29 |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 45,607,528 | $ | 41,523,171 | ||||
Net realized gain (loss) on investments, futures transactions and foreign currency transactions | 55,605,154 | 73,361,541 | ||||||
Net change in unrealized appreciation (depreciation) on investments, unfunded commitments, futures contracts and foreign currency transactions | (140,448,768 | ) | 79,907,630 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (39,236,086 | ) | 194,792,342 | |||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (32,796,558 | ) | ||||||
Investor Class | (4,533,690 | ) | ||||||
Class B | (1,563,809 | ) | ||||||
Class C | (10,983,845 | ) | ||||||
Class I | (38,245,609 | ) | ||||||
Class R2 | (211,253 | ) | ||||||
Class R3 | (7,874 | ) | ||||||
Class R6 | (1,115,473 | ) | ||||||
|
| |||||||
(89,458,111 | ) | |||||||
|
| |||||||
Dividends to shareholders from net investment income: | ||||||||
Class A | (16,659,348 | ) | ||||||
Investor Class | (4,037,985 | ) | ||||||
Class B | (791,063 | ) | ||||||
Class C | (4,923,638 | ) | ||||||
Class I | (20,353,145 | ) | ||||||
Class R2 | (86,627 | ) | ||||||
Class R3 | (3,011 | ) | ||||||
|
| |||||||
(46,854,817 | ) | |||||||
|
| |||||||
Total dividends and distributions to shareholders | (89,458,111 | ) | (46,854,817 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 256,249,660 | 458,777,858 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 80,255,791 | 41,265,270 | ||||||
Cost of shares redeemed | (533,526,985 | ) | (392,215,949 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (197,021,534 | ) | 107,827,179 | |||||
|
| |||||||
Net increase (decrease) in net assets | (325,715,731 | ) | 255,764,704 |
2018 | 2017 | |||||||
Net Assets |
| |||||||
Beginning of year | 1,823,063,672 | 1,567,298,968 | ||||||
|
| |||||||
End of year(2) | $ | 1,497,347,941 | $ | 1,823,063,672 | ||||
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|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $4,266,539 in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
30 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 19.97 | $ | 18.30 | $ | 18.79 | $ | 20.51 | $ | 19.83 | ||||||||||
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|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.52 | 0.48 | 0.58 | 0.68 | 0.82 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.04 | ) | 1.83 | (0.17 | ) | (0.98 | ) | 0.96 | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.07 | (0.09 | ) | 0.30 | 0.15 | 0.14 | ||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.45 | ) | 2.22 | 0.71 | (0.15 | ) | 1.92 | |||||||||||||
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|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.52 | ) | (0.55 | ) | (0.61 | ) | (0.70 | ) | (0.72 | ) | ||||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | |||||||||||
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|
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|
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|
|
|
| |||||||||||
Total dividends and distributions | (1.01 | ) | (0.55 | ) | (1.20 | ) | (1.57 | ) | (1.24 | ) | ||||||||||
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| |||||||||||
Net asset value at end of year | $ | 18.51 | $ | 19.97 | $ | 18.30 | $ | 18.79 | $ | 20.51 | ||||||||||
|
|
|
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|
|
|
|
| |||||||||||
Total investment return (b) | (2.38 | %) | 12.30 | % | 4.08 | % | (0.81 | %) | 10.08 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.72 | % | 2.52 | % | 3.21 | % | 3.49 | % | 4.06 | % | ||||||||||
Net expenses (c) | 1.01 | % | 1.01 | % | 1.02 | % | 1.02 | % | 1.01 | % | ||||||||||
Portfolio turnover rate (d) | 44 | % | 29 | % | 27 | % | 30 | % | 15 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 571,206 | $ | 652,333 | $ | 574,390 | $ | 581,920 | $ | 497,591 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rate not including mortgage dollar rolls was 36% for the year ended October 31, 2018. |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 19.99 | $ | 18.31 | $ | 18.80 | $ | 20.52 | $ | 19.84 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.50 | 0.47 | 0.56 | 0.65 | 0.78 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.05 | ) | 1.82 | (0.16 | ) | (0.99 | ) | 0.95 | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.07 | (0.09 | ) | 0.28 | 0.15 | 0.14 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.48 | ) | 2.20 | 0.68 | (0.19 | ) | 1.87 | |||||||||||||
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|
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|
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|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.50 | ) | (0.52 | ) | (0.58 | ) | (0.66 | ) | (0.67 | ) | ||||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.99 | ) | (0.52 | ) | (1.17 | ) | (1.53 | ) | (1.19 | ) | ||||||||||
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|
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| |||||||||||
Net asset value at end of year | $ | 18.52 | $ | 19.99 | $ | 18.31 | $ | 18.80 | $ | 20.52 | ||||||||||
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|
|
|
|
|
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|
|
| |||||||||||
Total investment return (b) | (2.56 | %) | 12.19 | % | 3.93 | % | (0.97 | %) | 9.83 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 2.59 | % | 2.45 | % | 3.09 | % | 3.34 | % | 3.89 | % | ||||||||||
Net expenses (c) | 1.13 | % | 1.14 | % | 1.16 | % | 1.18 | % | 1.23 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 1.14 | % | 1.14 | % | 1.16 | % | 1.18 | % | 1.23 | % | ||||||||||
Portfolio turnover rate (d) | 44 | % | 29 | % | 27 | % | 30 | % | 15 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 85,132 | $ | 94,000 | $ | 153,137 | $ | 159,798 | $ | 165,088 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rate not including mortgage dollar rolls was 36% for the year ended October 31, 2018. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 31 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 20.10 | $ | 18.40 | $ | 18.89 | $ | 20.61 | $ | 19.93 | ||||||||||
|
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|
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|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.36 | 0.32 | 0.42 | 0.51 | 0.63 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.05 | ) | 1.83 | (0.17 | ) | (0.99 | ) | 0.96 | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.07 | (0.09 | ) | 0.30 | 0.15 | 0.14 | ||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.62 | ) | 2.06 | 0.55 | (0.33 | ) | 1.73 | |||||||||||||
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|
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| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.35 | ) | (0.36 | ) | (0.45 | ) | (0.52 | ) | (0.53 | ) | ||||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.84 | ) | (0.36 | ) | (1.04 | ) | (1.39 | ) | (1.05 | ) | ||||||||||
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| |||||||||||
Net asset value at end of year | $ | 18.64 | $ | 20.10 | $ | 18.40 | $ | 18.89 | $ | 20.61 | ||||||||||
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|
|
|
|
|
| |||||||||||
Total investment return (b) | (3.22 | %) | 11.27 | % | 3.20 | % | (1.70 | %) | 8.99 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.85 | % | 1.67 | % | 2.34 | % | 2.60 | % | 3.14 | % | ||||||||||
Net expenses (c) | 1.88 | % | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 1.89 | % | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | ||||||||||
Portfolio turnover rate (d) | 44 | % | 29 | % | 27 | % | 30 | % | 15 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 30,343 | $ | 39,475 | $ | 42,253 | $ | 44,441 | $ | 49,283 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rate not including mortgage dollar rolls was 36% for the year ended October 31, 2018. |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 20.07 | $ | 18.37 | $ | 18.86 | $ | 20.58 | $ | 19.90 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.36 | 0.32 | 0.42 | 0.50 | 0.60 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.06 | ) | 1.83 | (0.17 | ) | (0.98 | ) | 0.98 | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.07 | (0.09 | ) | 0.30 | 0.15 | 0.15 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.63 | ) | 2.06 | 0.55 | (0.33 | ) | 1.73 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.35 | ) | (0.36 | ) | (0.45 | ) | (0.52 | ) | (0.53 | ) | ||||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.84 | ) | (0.36 | ) | (1.04 | ) | (1.39 | ) | (1.05 | ) | ||||||||||
|
|
|
|
|
|
|
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|
| |||||||||||
Net asset value at end of year | $ | 18.60 | $ | 20.07 | $ | 18.37 | $ | 18.86 | $ | 20.58 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (3.28 | %) | 11.35 | % | 3.15 | % | (1.70 | %) | 9.01 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.85 | % | 1.65 | % | 2.32 | % | 2.58 | % | 3.00 | % | ||||||||||
Net expenses (c) | 1.88 | % | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 1.89 | % | 1.89 | % | 1.91 | % | 1.93 | % | 1.98 | % | ||||||||||
Portfolio turnover rate (d) | 44 | % | 29 | % | 27 | % | 30 | % | 15 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 212,400 | $ | 266,592 | $ | 254,312 | $ | 235,811 | $ | 131,023 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rate not including mortgage dollar rolls was 36% for the year ended October 31, 2018. |
32 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class I | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 20.15 | $ | 18.46 | $ | 18.95 | $ | 20.66 | $ | 19.97 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.58 | 0.54 | 0.63 | 0.73 | 0.87 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.06 | ) | 1.84 | (0.16 | ) | (0.98 | ) | 0.96 | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.07 | (0.09 | ) | 0.28 | 0.15 | 0.15 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.41 | ) | 2.29 | 0.75 | (0.10 | ) | 1.98 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.57 | ) | (0.60 | ) | (0.65 | ) | (0.74 | ) | (0.77 | ) | ||||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | (0.87 | ) | (0.52 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (1.06 | ) | (0.60 | ) | (1.24 | ) | (1.61 | ) | (1.29 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 18.68 | $ | 20.15 | $ | 18.46 | $ | 18.95 | $ | 20.66 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (2.17 | %) | 12.60 | % | 4.30 | % | (0.51 | %) | 10.33 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 3.03 | % | 2.77 | % | 3.44 | % | 3.75 | % | 4.29 | % | ||||||||||
Net expenses (c) | 0.76 | % | 0.76 | % | 0.77 | % | 0.77 | % | 0.76 | % | ||||||||||
Portfolio turnover rate (d) | 44 | % | 29 | % | 27 | % | 30 | % | 15 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 499,675 | $ | 766,054 | $ | 542,330 | $ | 513,629 | $ | 430,408 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rate not including mortgage dollar rolls was 36% for the year ended October 31, 2018. |
Year ended October 31, | February 27, 2015** through October 31, | |||||||||||||||
Class R2 | 2018 | 2017 | 2016 | 2015 | ||||||||||||
Net asset value at beginning of period | $ | 19.96 | $ | 18.29 | $ | 18.78 | $ | 20.08 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income (loss) (a) | 0.50 | 0.46 | 0.55 | 0.36 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (1.04 | ) | 1.83 | (0.19 | ) | (1.35 | ) | |||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.07 | (0.09 | ) | 0.33 | 0.20 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total from investment operations | (0.47 | ) | 2.20 | 0.69 | (0.79 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Less dividends and distributions: | ||||||||||||||||
From net investment income | (0.50 | ) | (0.53 | ) | (0.59 | ) | (0.51 | ) | ||||||||
From net realized gain on investments | (0.49 | ) | — | (0.59 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total dividends and distributions | (0.99 | ) | (0.53 | ) | (1.18 | ) | (0.51 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value at end of period | $ | 18.50 | $ | 19.96 | $ | 18.29 | $ | 18.78 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total investment return (b) | (2.48 | %) | 12.20 | % | 3.99 | % | (3.92 | %) | ||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||
Net investment income (loss) | 2.61 | % | 2.36 | % | 3.03 | % | 2.90 | % †† | ||||||||
Net expenses (c) | 1.11 | % | 1.11 | % | 1.12 | % | 1.12 | % †† | ||||||||
Portfolio turnover rate (d) | 44 | % | 29 | % | 27 | % | 30 | % | ||||||||
Net assets at end of period (in 000’s) | $ | 3,587 | $ | 4,409 | $ | 838 | $ | 190 |
** | Inception date. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rate not including mortgage dollar rolls was 36% for the year ended October 31, 2018. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 33 |
Financial Highlights selected per share data and ratios
Year ended October 31, | February 29, 2016 ** through October 31, | |||||||||||
Class R3 | 2018 | 2017 | 2016 | |||||||||
Net asset value at beginning of period | $ | 19.97 | $ | 18.30 | $ | 17.10 | ||||||
|
|
|
|
|
| |||||||
Net investment income (loss) (a) | 0.42 | 0.42 | 0.35 | |||||||||
Net realized and unrealized gain (loss) on investments | (1.00 | ) | 1.82 | (1.69 | ) | |||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.06 | (0.09 | ) | 2.95 | ||||||||
|
|
|
|
|
| |||||||
Total from investment operations | (0.52 | ) | 2.15 | 1.61 | ||||||||
|
|
|
|
|
| |||||||
Less dividends and distributions: | ||||||||||||
From net investment income | (0.45 | ) | (0.48 | ) | (0.41 | ) | ||||||
From net realized gain on investments | (0.49 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Total dividends and distributions | (0.94 | ) | (0.48 | ) | (0.41 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value at end of period | $ | 18.51 | $ | 19.97 | $ | 18.30 | ||||||
|
|
|
|
|
| |||||||
Total investment return (b) | (2.73 | %) | 11.89 | % | 9.42 | % | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Net investment income (loss) | 2.19 | % | 2.16 | % | 2.81 | %†† | ||||||
Net expenses (c) | 1.35 | % | 1.36 | % | 1.36 | %†† | ||||||
Portfolio turnover rate (d) | 44 | % | 29 | % | 27 | % | ||||||
Net assets at end of period (in 000’s) | $ | 136 | $ | 201 | $ | 39 |
** | Inception date. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the period. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rate not including mortgage dollar rolls was 36% for the year ended October 31, 2018. |
Class R6 | February 28, 2018** through October 31, 2018 | |||
Net asset value at beginning of period | $ | 19.19 | ||
|
| |||
Net investment income (loss) (a) | 0.33 | |||
Net realized and unrealized gain (loss) on investments | (0.47 | ) | ||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.03 | |||
|
| |||
Total from investment operations | (0.11 | ) | ||
|
| |||
Less dividends: | ||||
From net investment income | (0.40 | ) | ||
|
| |||
Net asset value at end of period | $ | 18.68 | ||
|
| |||
Total investment return (b) | (0.61 | %) | ||
Ratios (to average net assets)/Supplemental Data: | ||||
Net investment income (loss) †† | 2.55 | % | ||
Net expenses (c) †† | 0.66 | % | ||
Portfolio turnover rate (d) | 44 | % | ||
Net assets at end of period (in 000’s) | $ | 94,869 |
** | Inception date. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R6 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | The portfolio turnover rate not including mortgage dollar rolls was 36% for the year ended October 31, 2018. |
34 | MainStay Income Builder Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds’’). These financial statements and notes relate to the MainStay Income Builder Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has nine classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on December 29, 1987. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on January 2, 2004. Investor Class shares commenced operations on February 28, 2008. Class R2 shares commenced operations on February 27, 2015. Class R3 shares commenced operations on February 29, 2016. Class R6 and Class T shares were registered for sale effective as of February 28, 2017. Class R6 shares commenced operations on February 28, 2018. As of October 31, 2018, Class T shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B
shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I, Class R2, Class R3 and Class R6 shares are offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T, Class R2 and Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee. Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seek current income consistent with reasonable opportunity for future growth of capital and income.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life
35 |
Notes to Financial Statements (continued)
Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisors (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisors or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisors, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Certain securities held by the Fund may principally trade in foreign markets. Events may occur between the time the foreign markets close
36 | MainStay Income Builder Fund |
and the time at which the Fund’s NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or the Subadvisors conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee may, pursuant to procedures adopted by the Board, adjust the value of the local price to reflect the estimated impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, certain foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third-party vendor in accordance with valuation procedures adopted by the Board and are generally categorized as Level 2 in the hierarchy. As of October 31, 2018, there were no foreign equity securities held by the Fund that were valued in such a manner.
Equity securities are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades. Futures contracts are valued at the last posted settlement price on the market where such futures are primarily traded.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisors. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisors to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values measured on the basis of the mean between the last current bid and ask prices based on dealer or exchange quotations and are generally categorized as Level 2 in the hierarchy.
Loan assignments, participations and commitments are valued at the average of bid quotations obtained from the engaged independent
pricing service and are generally categorized as Level 2 in the hierarchy. Certain loan assignments, participations and commitments may be valued by utilizing significant unobservable inputs obtained from the pricing service and are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, securities that were fair valued in such a manner are shown in the Portfolio of Investments.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisors might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or the Subadvisors determine the liquidity of the Fund’s investments; in doing so, the Manager or the Subadvisors may consider various factors, including: (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of October 31, 2018 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of October 31, 2018, securities deemed to be illiquid under procedures approved by the Board are shown in the Portfolio of Investments.
37 |
Notes to Financial Statements (continued)
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be reclaimable. The Fund will accrue such taxes and reclaims as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
The Fund may be subject to taxation on realized capital gains, repatriation proceeds and other transaction-based taxes imposed by certain countries in which it invests. The Fund will accrue such taxes as applicable based upon its current interpretation of tax rules and regulations that exist in the market in which it invests. Capital gains taxes relating to positions still held are reflected as a liability on the Statement of Assets and Liabilities, as well as an adjustment to the Fund’s net unrealized appreciation (depreciation). Taxes related to capital gains realized, if any, are reflected as part of net realized gain (loss) in the Statement of Operations. Changes in tax liabilities related to capital gains taxes on unrealized investment gains, if any, are reflected as part of the change in net unrealized appreciation (depreciation) on investments in the Statement of Operations. Transaction-based charges are generally assessed as a percentage of the transaction amount.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost
method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method and includes any realized gains and losses from repayments of principal on mortgage-backed securities. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities. Income from payment-in-kind securities, to the extent the Fund held any such securities during the year ended October 31, 2018, is accreted daily based on the effective interest method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may increase the costs of investing in mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisors to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisors will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under
38 | MainStay Income Builder Fund |
the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of October 31, 2018, the Fund did not hold any repurchase agreements.
(I) Loan Assignments, Participations and Commitments. The Fund may invest in loan assignments and participations (“loans”). Commitments are agreements to make money available to a borrower in a specified amount, at a specified rate and within a specified time. The Fund records an investment when the borrower withdraws money on a commitment or when a funded loan is purchased (trade date) and records interest as earned. These loans pay interest at rates that are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London Interbank Offered Rate (“LIBOR”).
The loans in which the Fund may invest are generally readily marketable, but may be subject to some restrictions on resale. For example, the Fund may be contractually obligated to receive approval from the agent bank and/or borrower prior to the sale of these investments. If the Fund purchases an assignment from a lender, the Fund will generally have direct contractual rights against the borrower in favor of the lender. If the Fund purchases a participation interest either from a lender or a participant, the Fund typically will have established a direct contractual relationship with the seller of the participation interest, but not with the borrower. Consequently, the Fund is subject to the credit risk of the lender or participant who sold the participation interest to the Fund, in addition to the usual credit risk of the borrower. In the event that the borrower, selling participant or intermediate participants become insolvent or enter into bankruptcy, the Fund may incur certain costs and delays in realizing payment, or may suffer a loss of principal and/or interest.
Unfunded commitments represent the remaining obligation of the Fund to the borrower. At any point in time, up to the maturity date of the issue, the borrower may demand the unfunded portion. Unfunded amounts, if any, are marked to market and any unrealized gains or losses are recorded in the Statement of Assets and Liabilities. As of October 31, 2018, the Fund did not hold any unfunded commitments.
(J) Futures Contracts. A futures contract is an agreement to purchase or sell a specified quantity of an underlying instrument at a specified future date and price, or to make or receive a cash payment based on the value of a financial instrument (e.g., foreign currency, interest rate, security or securities index). The Fund is subject to risks such as market price risk and/or interest rate risk in the normal course of investing in these transactions. Upon entering into a futures contract, the Fund is required to pledge to the broker or futures commission merchant an amount of cash and/or U.S. government securities equal to
a certain percentage of the collateral amount, known as the “initial margin.” During the period the futures contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. The Fund agrees to receive from or pay to the broker or futures commission merchant an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin.” When the futures contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.
The use of futures contracts involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contract or notional amounts and variation margin reflect the extent of the Fund’s involvement in open futures positions. There are several risks associated with the use of futures contracts as hedging techniques. There can be no assurance that a liquid market will exist at the time when the Fund seeks to close out a futures contract. If no liquid market exists, the Fund would remain obligated to meet margin requirements until the position is closed. Futures may involve a small initial investment relative to the risk assumed, which could result in losses greater than if they had not been used. Futures may be more volatile than direct investments in the instrument underlying the futures and may not correlate to the underlying instrument, causing a given hedge not to achieve its objectives. The Fund’s activities in futures contracts have minimal counterparty risk as they are conducted through regulated exchanges that guarantee the futures against default by the counterparty. In the event of a bankruptcy or insolvency of a futures commission merchant that holds margin on behalf of the Fund, the Fund may not be entitled to the return of the entire margin owed to the Fund, potentially resulting in a loss. The Fund may invest in futures contracts in order to hedge against anticipated changes in interest rates that might otherwise have an adverse effect upon the value of the Fund’s securities. The Fund may also use equity index futures contracts to increase the equity sensitivity to the Fund. The Fund’s investment in futures contracts and other derivatives may increase the volatility of the Fund’s NAVs and may result in a loss to the Fund. As of October 31, 2018, open futures contracts are shown in the Portfolio of Investments.
(K) Foreign Currency Forward Contracts. The Fund may enter into foreign currency forward contracts, which are agreements to buy or sell foreign currencies on a specified future date at a specified rate. The Fund is subject to foreign currency exchange rate risk in the normal course of investing in these transactions. During the period the forward contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. Cash movement occurs on settlement date. When the forward contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract. The Fund may purchase and sell foreign currency forward contracts for purposes of seeking to enhance portfolio returns and manage portfolio risk more efficiently. Foreign currency forward contracts may also be used to gain exposure to a particular currency or to hedge against the
39 |
Notes to Financial Statements (continued)
risk of loss due to changing currency exchange rates. Foreign currency forward contracts to purchase or sell a foreign currency may also be used in anticipation of future purchases or sales of securities denominated in foreign currency, even if the specific investments have not yet been selected.
The use of foreign currency forward contracts involves, to varying degrees, elements of risk in excess of the amount recognized in the Statement of Assets and Liabilities, including counterparty risk, market risk and illiquidity risk. Counterparty risk is heightened for these instruments because foreign currency forward contracts are not exchange-traded and therefore no clearinghouse or exchange stands ready to meet the obligations under such contracts. Thus, the Fund faces the risk that its counterparties under such contracts may not perform their obligations. Market risk is the risk that the value of a foreign currency forward contract will depreciate due to unfavorable changes in exchange rates. Illiquidity risk arises because the secondary market for foreign currency forward contracts may have less liquidity relative to markets for other securities and financial instruments. Risks also arise from the possible movements in the foreign exchange rates underlying these instruments. While the Fund may enter into forward contracts to reduce currency exchange risks, changes in currency exchange rates may result in poorer overall performance for the Fund than if it had not engaged in such transactions. Exchange rate movements can be large, depending on the currency, and can last for extended periods of time, affecting the value of the Fund’s assets. Moreover, there may be an imperfect correlation between the Fund’s holdings of securities denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving the intended hedge or expose the Fund to the risk of currency exchange loss. The unrealized appreciation (depreciation) on forward contracts also reflects the Fund’s exposure at the valuation date to credit loss in the event of a counterparty’s failure to perform its obligations. As of October 31, 2018, open foreign currency forward contracts are shown in the Portfolio of Investments.
(L) Foreign Currency Transactions. The Fund’s books and records are maintained in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities—at the valuation date; and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or
losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(M) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activity, if any, is reflected in the Statement of Operations. As of October 31, 2018, the Fund had securities on loan with a value of $296,156 and had received non-cash collateral in the form of U.S. Treasury securities with a value of $312,698.
(N) Restricted Securities. Restricted securities, as disclosed in Note 5, are securities which have been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933, as amended. Disposal of these securities may involve time-consuming negotiations and expenses, and it may be difficult to obtain a prompt sale at an acceptable price.
(O) Debt and Foreign Securities Risk. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region. Debt securities are also subject to the risks associated with changes in interest rates.
The Fund may invest in high-yield debt securities (sometimes called “junk bonds’’), which are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. These securities pay investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility. In times of unusual or adverse market, economic or political conditions, these securities may experience higher than normal default rates.
The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. These risks include those resulting from currency fluctuations, future adverse political or economic developments and possible imposition of currency
40 | MainStay Income Builder Fund |
exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
The Fund may invest in loans which are usually rated below investment grade and are generally considered speculative because they present a greater risk of loss, including default, than higher rated debt securities. These investments pay investors a higher interest rate than investment grade debt securities because of the increased risk of loss. Although certain loans are collateralized, there is no guarantee that the value of the collateral will be sufficient to repay the loan. In a recession or serious credit event, the value of these investments could decline significantly. As a result, the Fund’s NAVs could go down and you could lose money.
In addition, loans generally are subject to extended settlement periods that may be longer than seven days. As a result, the Fund may be adversely affected by selling other investments at an unfavorable time and/or under unfavorable conditions or engaging in borrowing transactions, such as borrowing against its credit facility, to raise cash to meet redemption obligations or pursue other investment opportunities.
In certain circumstances, loans may not be deemed to be securities. As a result, the Fund may not have the protection of anti-fraud provisions of the federal securities laws. In such cases, the Fund generally must rely on the contractual provisions in the loan agreement and common-law fraud protections under applicable state law.
(P) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(Q) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. The Fund entered into Treasury futures contracts in order to hedge against anticipated changes in interest rates that might otherwise have an adverse effect upon the value of the Fund’s securities. The Fund also entered into domestic and foreign equity index futures contracts to increase the equity sensitivity to the Fund. Foreign currency forward contracts were used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. These derivatives are not accounted for as hedging instruments.
Fair value of derivative instruments as of October 31, 2018:
Asset Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized appreciation on investments and futures contracts (a) | $ | — | $ | — | $ | 474,955 | $ | 474,955 | |||||||||
Forward Contracts | Unrealized appreciation on foreign currency forward contracts | 6,080,397 | — | — | 6,080,397 | |||||||||||||
|
| |||||||||||||||||
Total Fair Value | $ | 6,080,397 | $ | — | $ | 474,955 | $ | 6,555,352 | ||||||||||
|
|
Liability Derivatives
Statement of Assets and Liabilities Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net Assets—Net unrealized depreciation on investments and futures contracts (a) | $ | — | $ | (10,514,129 | ) | $ | (4,834,302 | ) | $ | (15,348,431 | ) | ||||||
Forward Contracts | Unrealized depreciation on foreign currency forward contracts | (1,877,223 | ) | — | — | (1,877,223 | ) | |||||||||||
|
| |||||||||||||||||
Total Fair Value | $ | (1,877,223 | ) | $ | (10,514,129 | ) | $ | (4,834,302 | ) | $ | (17,225,654 | ) | ||||||
|
|
(a) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
41 |
Notes to Financial Statements (continued)
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2018:
Realized Gain (Loss)
Statement of Operations Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net realized gain (loss) on futures transactions | $ | — | $ | 37,650,126 | $ | (4,485,762 | ) | $ | 33,164,364 | ||||||||
Forward Contracts | Net realized gain (loss) on foreign currency forward transactions | 1,760,171 | — | — | 1,760,171 | |||||||||||||
|
| |||||||||||||||||
Total Realized Gain (Loss) | $ | 1,760,171 | $ | 37,650,126 | $ | (4,485,762 | ) | $ | 34,924,535 | |||||||||
|
|
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | ||||||||||||||
Futures Contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | — | $ | (30,854,970 | ) | $ | (2,371,003 | ) | $ | (33,225,973 | ) | ||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | 4,069,606 | — | — | 4,069,606 | |||||||||||||
|
| |||||||||||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 4,069,606 | $ | (30,854,970 | ) | $ | (2,371,003 | ) | $ | (29,156,367 | ) | |||||||
|
|
Average Notional Amount
Foreign Exchange Contracts Risk | Equity Contracts Risk | Interest Rate Contracts Risk | Total | |||||||||||||
Futures Contracts Long | $ | — | $ | 305,246,385 | $ | 198,044,578 | $ | 503,290,963 | ||||||||
Futures Contracts Short | $ | — | $ | — | $ | (80,964,055 | ) | $ | (80,964,055 | ) | ||||||
Forward Contracts Long | $ | 130,755,191 | $ | — | $ | — | $ | 130,755,191 | ||||||||
Forward Contracts Short | $ | (242,794,008 | ) | $ | — | $ | — | $ | (242,794,008 | ) | ||||||
|
|
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisors. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields’’ or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as a Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the fixed-income portion of the Fund, pursuant to the terms of the Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”)
between New York Life Investments and MacKay Shields. Epoch Investment Partners, Inc. (“Epoch” or “Subadvisor” and, together with MacKay Shields, the “Subadvisors”), a registered investment advisor, also serves as a Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the equity portion of the Fund, pursuant to the terms of an Amended and Restated Subadvisory Agreement between New York Life Investments and Epoch. Asset allocation decisions for the Fund are made by a committee chaired by MacKay Shields in collaboration with New York Life Investments. New York Life Investments pays for the services of the Subadvisors.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.64% up to $500 million; 0.60% from $500 million to $1 billion; 0.575% from $1 billion to $5 billion; and 0.565% in excess of $5 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01%
42 | MainStay Income Builder Fund |
in excess of $100 million. During the year ended October 31, 2018, the effective management fee rate was 0.61%, inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets (exclusive of any applicable waivers/reimbursements).
Prior to February 28, 2018, the Fund paid the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.64% up to $500 million; 0.60% from $500 million to $1 billion; and 0.575% in excess of $1 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019 and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $10,448,819 and voluntarily waived and/or reimbursed certain class specific expenses in the amount of $35,031.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans’’) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B
and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plan for the Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the year ended October 31, 2018, shareholder service fees incurred by the Fund were as follows:
Class R2 | $ | 3,947 | ||
Class R3 | 129 |
(C) Sales Charges. During the year ended October 31, 2018, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $140,151 and $33,974, respectively.
During the year ended October 31, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $6,964, $10, $36,688 and $24,925, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 620,017 | ||
Investor Class | 209,745 | |||
Class B | 82,123 | |||
Class C | 580,225 | |||
Class I | 665,165 | |||
Class R2 | 3,924 | |||
Class R3 | 127 |
43 |
Notes to Financial Statements (continued)
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain
shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the year ended October 31, 2018, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Companies | Value, Beginning of Year | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Year | Dividend Income | Other Distributions | Shares End of Year | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | — | $ | 233,027 | $ | (185,808 | ) | $ | — | $ | — | $ | 47,219 | $ | 417 | $ | — | 47,219 |
(G) Capital. As of October 31, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class R2 | $ | 27,298 | 0.8 | % | ||||
Class R3 | 29,742 | 21.8 | ||||||
Class R6 | 94,372,297 | 99.5 |
Note 4–Federal Income Tax
As of October 31, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||
Investments in Securities | $1,511,430,597 | $65,781,808 | $(73,102,790) | $(7,320,982) |
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary Income | Accumulated Capital and Other Gain (Loss) | Other Temporary Differences | Unrealized Appreciation (Depreciation) | Total Accumulated Gain (Loss) | ||||
$4,782,588 | $25,237,629 | $(181,452) | $(7,872,052) | $21,966,713 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily due to wash sale adjustments, mark to market of futures contracts, mark to market of foreign forward contracts and partnerships. The other temporary differences are primarily due to dividends payable.
The following table discloses the current year reclassifications between total distributable earnings (loss) and additional paid-in capital arising from permanent differences; net assets as of October 31, 2018 were not affected.
Total Distributable Earnings (Loss) | Additional Paid-In Capital | |
$(863,750) | $863,750 |
The reclassifications for the Fund are primarily due to equalization.
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 53,964,130 | $ | 46,854,817 | ||||
Long-term capital gain | 35,493,981 | — | ||||||
Total | $ | 89,458,111 | $ | 46,854,817 |
Note 5–Restricted Securities
As of October 31, 2018, the Fund held the following restricted security.
Security | Date(s) of Acquisition | Shares | Cost | 10/31/18 Value | Percent of Net Assets | |||||||||||||||
ION Media Networks, Inc. | ||||||||||||||||||||
Common Stock | 3/11/14 | 12 | $ | 1 | $ | 7,431 | 0.0 | %‡ |
‡ | Less than one-tenth of a percent. |
Note 6–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 7–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the
44 | MainStay Income Builder Fund |
Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to July 31, 2018, the aggregate commitment amount and the commitment fee were the same as those under the current Credit Agreement. During the year ended October 31, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 8–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the year ended October 31, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 9–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2018, purchases and sales of U.S. government securities were $278,397 and $169,371, respectively. Purchases and sales of securities, other than U.S. government securities and short-term securities, were $422,932 and $666,090, respectively.
Note 10–Capital Share Transactions
Class A | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,277,142 | $ | 63,519,237 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,625,451 | 31,492,247 | ||||||
Shares redeemed | (7,071,027 | ) | (136,048,540 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (2,168,434 | ) | (41,037,056 | ) | ||||
Shares converted into Class A (See Note 1) | 535,852 | 10,454,119 | ||||||
Shares converted from Class A (See Note 1) | (166,671 | ) | (3,136,944 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,799,253 | ) | $ | (33,719,881 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 5,445,293 | $ | 103,835,754 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 806,758 | 15,419,170 | ||||||
Shares redeemed | (6,516,965 | ) | (124,496,614 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (264,914 | ) | (5,241,690 | ) | ||||
Shares converted into Class A (See Note 1) | 3,943,157 | 77,461,468 | ||||||
Shares converted from Class A (See Note 1) | (2,402,635 | ) | (45,034,019 | ) | ||||
|
| |||||||
Net increase (decrease) | 1,275,608 | $ | 27,185,759 | |||||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 349,978 | $ | 6,743,482 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 232,814 | 4,514,249 | ||||||
Shares redeemed | (484,985 | ) | (9,337,314 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 97,807 | 1,920,417 | ||||||
Shares converted into Investor Class (See Note 1) | 238,043 | 4,518,940 | ||||||
Shares converted from Investor Class (See Note 1) | (442,741 | ) | (8,657,466 | ) | ||||
|
| |||||||
Net increase (decrease) | (106,891 | ) | $ | (2,218,109 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 561,270 | $ | 10,722,478 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 210,412 | 4,014,072 | ||||||
Shares redeemed | (836,015 | ) | (15,946,984 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (64,333 | ) | (1,210,434 | ) | ||||
Shares converted into Investor Class (See Note 1) | 256,990 | 4,920,385 | ||||||
Shares converted from Investor Class (See Note 1) | (3,853,417 | ) | (75,785,243 | ) | ||||
|
| |||||||
Net increase (decrease) | (3,660,760 | ) | $ | (72,075,292 | ) | |||
|
| |||||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 40,071 | $ | 780,294 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 70,580 | 1,380,721 | ||||||
Shares redeemed | (274,725 | ) | (5,316,357 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (164,074 | ) | (3,155,342 | ) | ||||
Shares converted from Class B (See Note 1) | (171,397 | ) | (3,331,374 | ) | ||||
|
| |||||||
Net increase (decrease) | (335,471 | ) | $ | (6,486,716 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 178,134 | $ | 3,338,656 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 36,233 | 695,672 | ||||||
Shares redeemed | (284,695 | ) | (5,465,607 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (70,328 | ) | (1,431,279 | ) | ||||
Shares converted from Class B (See Note 1) | (261,858 | ) | (5,030,161 | ) | ||||
|
| |||||||
Net increase (decrease) | (332,186 | ) | $ | (6,461,440 | ) | |||
|
| |||||||
45 |
Notes to Financial Statements (continued)
Class C | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,454,490 | $ | 28,456,058 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 500,849 | 9,775,626 | ||||||
Shares redeemed | (3,821,801 | ) | (73,633,020 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,866,462 | ) | $ | (35,401,336 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 3,255,990 | $ | 62,351,105 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 214,045 | 4,107,924 | ||||||
|
| |||||||
Shares redeemed | (4,026,686 | ) | (77,004,231 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (556,651 | ) | (10,545,202 | ) | ||||
Shares converted from Class C (See Note 1) | (1,336 | ) | (25,920 | ) | ||||
|
| |||||||
Net increase (decrease) | (557,987 | ) | $ | (10,571,122 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 7,928,175 | $ | 155,016,664 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,629,572 | 31,887,809 | ||||||
Shares redeemed | (15,583,724 | ) | (302,323,889 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (6,025,977 | ) | (115,419,416 | ) | ||||
Shares converted into Class I (See Note 1) | 8,018 | 152,725 | ||||||
Shares converted from Class I (See Note 1) | (5,252,973 | ) | (99,476,079 | ) | ||||
|
| |||||||
Net increase (decrease) | (11,270,932 | ) | $ | (214,742,770 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 14,212,267 | $ | 274,097,860 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 879,241 | 16,984,704 | ||||||
Shares redeemed | (8,753,443 | ) | (168,302,487 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 6,338,065 | 122,780,077 | ||||||
Shares converted into Class I (See Note 1) | 2,303,694 | 43,510,391 | ||||||
|
| |||||||
Net increase (decrease) | 8,641,759 | $ | 166,290,468 | |||||
|
| |||||||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 20,004 | $ | 384,300 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 4,394 | 85,139 | ||||||
Shares redeemed | (51,345 | ) | (991,089 | ) | ||||
|
| |||||||
Net increase (decrease) | (26,947 | ) | $ | (521,650 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 225,540 | $ | 4,278,601 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,226 | 42,495 | ||||||
Shares redeemed | (51,821 | ) | (995,471 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 175,945 | 3,325,625 | ||||||
Shares converted from Class R2 (See Note 1) | (862 | ) | (16,901 | ) | ||||
|
| |||||||
Net increase (decrease) | 175,083 | $ | 3,308,724 | |||||
|
|
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,121 | $ | 59,541 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 234 | 4,527 | ||||||
Shares redeemed | (6,078 | ) | (115,889 | ) | ||||
|
| |||||||
Net increase (decrease) | (2,723 | ) | $ | (51,821 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 8,110 | $ | 153,404 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 64 | 1,233 | ||||||
Shares redeemed | (241 | ) | (4,555 | ) | ||||
|
| |||||||
Net increase (decrease) | 7,933 | $ | 150,082 | |||||
|
| |||||||
Class R6 | Shares | Amount | ||||||
Period ended October 31, 2018 (a): | ||||||||
Shares sold | 67,172 | $ | 1,290,084 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 58,226 | 1,115,473 | ||||||
Shares redeemed | (299,556 | ) | (5,760,887 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (174,158 | ) | (3,355,330 | ) | ||||
Shares converted into Class R6 (See Note 1) | 5,251,919 | 99,476,079 | ||||||
|
| |||||||
Net increase (decrease) | 5,077,761 | $ | 96,120,749 | |||||
|
|
(a) | The inception date of the class was February 28, 2018. |
Note 11–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
Note 12–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
46 | MainStay Income Builder Fund |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The MainStay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MainStay Income Builder Fund (the Fund), one of the funds constituting The MainStay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years or periods in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians, the transfer agent, and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
47 |
Federal Income Tax Information
(Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders in a written statement as to the federal tax status of dividends paid by the Fund during such fiscal years. Accordingly, the Fund paid $35,493,981 as long term capital gain distributions.
For the fiscal year ended October 31, 2018, the Fund designated approximately $31,604,621 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2018 should be multiplied by 23.91% to arrive at the amount eligible for the corporate dividend-received deduction.
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
48 | MainStay Income Builder Fund |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
49 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
50 | MainStay Income Builder Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
51 |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
* | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
52 | MainStay Income Builder Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1717042 MS293-18 | MSIB11-12/18 (NYLIM) NL216 |
MainStay MacKay Emerging Markets Debt Fund
(Formerly known as MainStay Emerging Markets Debt Fund)
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception Date | One Year | Five Years | Ten Years | Gross Expense Ratio3 | ||||||||||||||||||
Class A Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | | 6/1/1998 | | | –11.14 –6.95 | %
| | 1.50 2.44 | %
| | 8.26 8.76 | %
| | 1.22 1.22 | %
| |||||||
Investor Class Shares | Maximum 4.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –11.36 –7.18 | | | 1.31 2.25 | | | 8.07 8.57 | | | 1.42 1.42 |
| |||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 6/1/1998 | | –12.43 –7.98 | | | 1.16 1.48 | | | 7.77 7.77 | | | 2.17 2.17 |
| |||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | –8.77 –7.88 | | | 1.48 1.48 | | | 7.77 7.77 | | | 2.17 2.17 |
| |||||||||
Class I Shares | No Sales Charge | 8/31/2007 | –6.80 | 2.70 | 9.03 | 0.97 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
JPMorgan EMBI Global Diversified Index4 | –4.39 | % | 4.35 | % | 9.20 | % | ||||||
Morningstar Emerging Markets Bond Category Average5 | –4.95 | 2.20 | 8.69 |
4. | The JPMorgan EMBI Global Diversified Index is the Fund’s primary broad-based securities market index for comparison purposes. The JPMorgan EMBI Global Diversified Index is a market-capitalization weighted, total return index tracking the traded market for U.S. dollar-denominated Brady Bonds, Eurobonds, traded loans and local market debt instruments issued by sovereign and quasi-sovereign entities. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Morningstar Emerging Markets Bond Category Average is representative of funds that invest more than 65% of their assets in foreign bonds from developing countries. The largest portion of the emerging-markets bond market comes from Latin America, followed by Eastern Europe. Africa, the Middle East, and Asia make up the rest. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Emerging Markets Debt Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Emerging Markets Debt Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 10/31/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 962.80 | $ | 6.33 | $ | 1,018.75 | $ | 6.51 | 1.28% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 962.10 | $ | 7.37 | $ | 1,017.69 | $ | 7.58 | 1.49% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 957.40 | $ | 11.05 | $ | 1,013.91 | $ | 11.37 | 2.24% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 958.50 | $ | 11.06 | $ | 1,013.91 | $ | 11.37 | 2.24% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 964.10 | $ | 5.10 | $ | 1,020.01 | $ | 5.24 | 1.03% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Country Composition as of October 31, 2018 (Unaudited)
Mexico | 9.4 | % | ||
Brazil | 8.4 | |||
Indonesia | 7.5 | |||
Russia | 5.6 | |||
China | 4.7 | |||
Kazakhstan | 4.5 | |||
India | 4.3 | |||
Croatia | 4.1 | |||
Dominican Republic | 4.0 | |||
Malaysia | 3.5 | |||
Oman | 2.7 | |||
Ukraine | 2.7 | |||
El Salvador | 2.3 | |||
Paraguay | 2.2 | |||
Guatemala | 2.0 | |||
Nigeria | 2.0 | |||
Ecuador | 1.9 | |||
Venezuela | 1.8 | |||
Belarus | 1.6 | |||
Costa Rica | 1.6 |
Peru | 1.5 | % | ||
Turkey | 1.4 | |||
Uruguay | 1.4 | |||
Ghana | 1.3 | |||
Ivory Coast | 1.3 | |||
Saudi Arabia | 1.3 | |||
United States | 1.2 | |||
Egypt | 1.1 | |||
Iraq | 1.1 | |||
Netherlands | 1.1 | |||
Senegal | 0.9 | |||
Cameroon | 0.8 | |||
Pakistan | 0.8 | |||
Hong Kong | 0.7 | |||
Kenya | 0.7 | |||
Macao | 0.7 | |||
Vietnam | 0.7 | |||
Other Assets, Less Liabilities | 5.2 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 11 for specific holdings within these categories. The Fund’s portfolio is subject to change.
Top Ten Issuers Held as of October 31, 2018 (excluding short-term investment) (Unaudited)
1. | KazMunayGas National Co. JSC, 5.375%–6.375%, due 4/24/30–10/24/48 |
2. | Pertamina Persero PT, 5.625%, due 5/20/43 |
3. | Croatia Government International Bond, 6.00%–6.375%, due 3/24/21–1/26/24 |
4. | Petrobras Global Finance B.V., 6.85%–7.375%, due 6/5/15–1/17/27 |
5. | Petroleos Mexicanos, 6.75%, due 9/21/47 |
6. | Dominican Republic International Bond, 5.95%–6.00%, due 1/25/27–7/19/28 |
7. | OmGrid Funding, Ltd., 5.196%, due 5/16/27 |
8. | Ukraine Government International Bond, 7.75%, due 9/1/26 |
9. | El Salvador Government International Bond, 6.375%, due 1/18/27 |
10. | Paraguay Government International Bond, 6.10%, due 8/11/44 |
8 | MainStay MacKay Emerging Markets Debt Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Dan Roberts, PhD, and Jakob Bak, PhD, CFA, of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Emerging Markets Debt Fund perform relative to its benchmark and peer group during the 12 months ended October 31, 2018?
For the 12 months ended October 31, 2018, Class I shares of MainStay MacKay Emerging Markets Debt Fund returned –6.80%, underperforming the –4.39% return of the Fund’s primary benchmark, the JPMorgan EMBI Global Diversified Index. Over the same period, Class I shares also underperformed the –4.95% return of the Morningstar Emerging Markets Bond Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
The interest rate policies fixed by the U.S. Federal Reserve (“Fed”) and various global central banks deeply influenced fixed-income markets and, more specifically, emerging-markets debt during the reporting period. In particular, the policy committee of the Fed raised its federal funds target rate four times during the period to forestall any potential of the economy overheating. In response, U.S. Treasury yields rose across the yield curve,2 though less so in longer maturities. Ballooning Treasury issuance to fund the growing U.S. budget deficit also led to higher rates. More modest increases on the long end of the yield curve reflected tepid inflation, trade policy flux and the failure of aggregate demand to pressure resource capacity. In general, the moves in rates negatively impacted the returns of fixed-income instruments, specifically emerging-markets debt.
Earlier in the reporting period, the European Central Bank (“ECB”) announced that it would trim its corporate bond buying program. The ECB also indicated its intention to keep its main rate at zero for “an extended period of time, and well past the horizon of net asset purchases.”3 Country-specific developments further affected global debt markets. Venezuela was battered by economic challenges, international sanctions and civil strife. Against that backdrop, rating agencies declared $60 billion of Venezuelan debt in default after the Venezuelan Government failed to pay interest on some of its sovereign debt. In South Africa, the ruling ANC (African National Congress) replaced its troubled leader on the heels of continuing corruption scandals. Chile elected a right-of-center president, matching a similar trend in neighboring Argentina. Although these were important developments during the reporting period, they did not have a meaningful impact on the Fund.
The Fund underperformed the JPMorgan EMBI Global Diversified Index during the reporting period, largely driven by weakening positions in Venezuela and, to a lesser degree, Costa Rica. Venezuela proved the biggest detractor from performance both in absolute and benchmark-relative terms as years of government mismanagement finally caught up with the country. Despite having the world’s largest oil reserves and sharply higher oil prices, oil production levels cratered and with it the country’s ability to service its debt. Because U.S. sanctions made it impossible to restructure Venezuelan bonds, no lender tried to accelerate the bond payments or attach any assets owned by the national oil company, PDVSA.
Were there any changes to the Fund during the reporting period?
Effective February 28, 2018, MainStay Emerging Markets Debt Fund was renamed MainStay MacKay Emerging Markets Debt Fund. Also effective February 28, 2018, Michael Kimble was removed from the Fund and the Fund’s investment objective was simplified. For more information on these changes, please refer to the supplements dated December 15, 2017.
What was the Fund’s duration4 strategy during the reporting period?
The Fund ended the reporting period with a longer duration than that of its benchmark. As of October 31, 2018, the Fund’s duration was 7.6 years, compared to the 6.6-year duration of the JPMorgan EMBI Global Diversified Index.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
Credits in the basic industry, media and transportation sectors were the strongest positive contributors to the Fund’s performance relative to the JPMorgan EMBI Global Diversified Index during the reporting period. (Contributions take weightings and total returns into account.) In contrast, government bonds of Russia and Mexico produced the weakest benchmark-relative returns.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
2. | The yield curve is a line that plots the yields of various securities of similar quality—typically U.S. Treasury issues—across a range of maturities. The U.S. Treasury yield curve serves as a benchmark for other debt and is used in economic forecasting. |
3. | Press conference with Mario Draghi, President of the ECB, March 8, 2018. |
4. | Duration is a measure of the price sensitivity of a fixed-income investment to changes in interest rates. Duration is expressed as a number of years and is considered a more accurate sensitivity gauge than average maturity. |
9 |
What were some of the Fund’s largest purchases and sales during the reporting period?
The Fund bought a position in a sovereign Ecuadorian bond in which the extra spread5 resulting from a recent sell-off appeared to provide sufficient compensation for that market’s historical risks. In our opinion, bonds in El Salvador, another area of significant Fund acquisition during the reporting period, offered attractive investment opportunities due to comparatively high yields and the country’s low dependence on commodities. The Fund also bought a position in Malaysian development company 1MDB after the bonds sold off despite government guarantees that we believed should support their value.
The Fund sold all of its Argentinian positions out of concern that the market had priced in unrealistically high expectations for implementation of the government’s promised reforms. We also sold the Fund’s holdings in Sri Lanka, where spreads appeared tight relative to the country’s macro fundamentals and political considerations. Another significant sale involved most of the Fund’s position in Chinese electronics giant Huawei, which we believed could prove vulnerable to future sanctions in the escalating trade conflict between China and the United States.
How did the Fund’s sector weightings change during the reporting period?
During the reporting period, the Fund lowered its exposure to sovereign debt while slightly increasing its exposure to quasi-sovereigns (state owned companies). On a regional basis, the Fund increased its weightings in Asia while reducing weightings in Europe. Overall, the Fund decreased its exposure to credits rated CCC6 and below relative to the JPMorgan EMBI Global Diversified Index.
How was the Fund positioned at the end of the reporting period?
As of October 31, 2018, the Fund held overweight exposure to credit relative to the JPMorgan EMBI Global Diversified Index. As of the same date, the Fund held slightly overweight positions in Latin America and Asia, coupled with slightly underweight positions in Africa and Europe. The Fund’s most significantly overweight country allocations included Brazil, Mexico and Russia.
5. | The terms “spread” and “yield spread” may refer to the difference in yield between a security or type of security and comparable U.S. Treasury issues. The terms may also refer to the difference in yield between two specific securities or types of securities at a given time. |
6. | An obligation rated ‘CCC’ by Standard & Poor’s (“S&P”) is deemed by S&P to be currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. It is the opinion of S&P that in the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. When applied to Fund holdings, ratings are based solely on the creditworthiness of the bonds in the portfolio and are not meant to represent the security or safety of the Fund. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
10 | MainStay MacKay Emerging Markets Debt Fund |
Portfolio of Investments October 31, 2018
Principal Amount | Value | |||||||
Long-Term Bonds 94.3%† Corporate Bonds 52.0% |
| |||||||
Brazil 8.4% | ||||||||
Braskem Netherlands Finance B.V. | $ | 1,500,000 | $ | 1,393,500 | ||||
Minerva Luxembourg S.A. | 750,000 | 692,813 | ||||||
Petrobras Global Finance B.V. | ||||||||
6.85%, due 6/5/15 | 1,000,000 | 886,250 | ||||||
7.375%, due 1/17/27 | 4,500,000 | 4,663,575 | ||||||
Rumo Luxembourg S.A R.L. | 1,500,000 | 1,426,890 | ||||||
Vale Overseas, Ltd. | 2,050,000 | 2,276,094 | ||||||
|
| |||||||
11,339,122 | ||||||||
|
| |||||||
China 4.7% |
| |||||||
Alibaba Group Holding, Ltd. | 2,000,000 | 1,911,606 | ||||||
China Evergrande Group | 1,000,000 | 783,750 | ||||||
JD.com, Inc. | 1,500,000 | 1,347,441 | ||||||
Proven Glory Capital, Ltd. | 1,000,000 | 891,685 | ||||||
Tencent Holdings, Ltd. | 1,500,000 | 1,376,007 | ||||||
|
| |||||||
6,310,489 | ||||||||
|
| |||||||
Costa Rica 1.6% |
| |||||||
Instituto Costarricense de Electricidad | 3,000,000 | 2,130,030 | ||||||
|
| |||||||
Hong Kong 0.7% |
| |||||||
Melco Resorts Finance, Ltd. | 1,000,000 | 916,691 | ||||||
|
| |||||||
India 4.3% |
| |||||||
Abja Investment Co. | 1,000,000 | 861,633 | ||||||
Bharti Airtel, Ltd. | 2,000,000 | 1,794,011 | ||||||
Reliance Industries, Ltd. | 1,000,000 | 898,277 |
Principal Amount | Value | |||||||
India (continued) |
| |||||||
Tata Motors, Ltd. | $ | 1,500,000 | $ | 1,462,350 | ||||
Vedanta Resources PLC | 1,000,000 | 882,344 | ||||||
|
| |||||||
5,898,615 | ||||||||
|
| |||||||
Indonesia 6.1% |
| |||||||
Indika Energy Capital III Pte, Ltd. | 1,000,000 | 891,830 | ||||||
Listrindo Capital B.V. | 1,500,000 | 1,333,500 | ||||||
Pertamina Persero PT | 6,700,000 | 6,042,093 | ||||||
|
| |||||||
8,267,423 | ||||||||
|
| |||||||
Kazakhstan 4.5% |
| |||||||
KazMunayGas National Co. JSC (a) | ||||||||
5.375%, due 4/24/30 | 2,000,000 | 1,985,000 | ||||||
6.375%, due 10/24/48 | 4,000,000 | 4,058,376 | ||||||
|
| |||||||
6,043,376 | ||||||||
|
| |||||||
Macao 0.7% |
| |||||||
Sands China, Ltd. (a) | ||||||||
4.60%, due 8/8/23 | 435,000 | 429,022 | ||||||
5.125%, due 8/8/25 | 565,000 | 554,002 | ||||||
|
| |||||||
983,024 | ||||||||
|
| |||||||
Malaysia 3.5% |
| |||||||
1MDB Global Investments, Ltd. | 1,000,000 | 934,964 | ||||||
Gohl Capital, Ltd. | 1,500,000 | 1,402,617 | ||||||
Petroliam Nasional BHD | 2,000,000 | 2,458,520 | ||||||
|
| |||||||
4,796,101 | ||||||||
|
| |||||||
Mexico 7.9% |
| |||||||
Cemex S.A.B. de C.V. | 2,000,000 | 2,110,000 | ||||||
Comision Federal de Electricidad | 2,000,000 | 1,889,020 | ||||||
Grupo Televisa S.A.B. | 1,250,000 | 1,240,507 | ||||||
Petroleos Mexicanos | 6,385,000 | 5,480,245 | ||||||
|
| |||||||
10,719,772 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of Investments October 31, 2018 (continued)
Principal Amount | Value | |||||||
Corporate Bonds (continued) |
| |||||||
Netherlands 1.1% |
| |||||||
GTH Finance B.V. | $ | 1,500,000 | $ | 1,552,500 | ||||
|
| |||||||
Oman 2.7% |
| |||||||
OmGrid Funding, Ltd. | ||||||||
Series Reg S | 2,000,000 | 1,811,520 | ||||||
5.196%, due 5/16/27 (a) | 2,000,000 | 1,811,520 | ||||||
|
| |||||||
3,623,040 | ||||||||
|
| |||||||
Peru 1.5% |
| |||||||
Banco de Credito del | 1,000,000 | 990,500 | ||||||
Southern Copper Corp. | 1,000,000 | 1,042,228 | ||||||
|
| |||||||
2,032,728 | ||||||||
|
| |||||||
Russia 2.6% |
| |||||||
Gazprom OAO Via Gaz Capital S.A. | 1,500,000 | 1,833,300 | ||||||
Metalloinvest Finance DAC | 1,000,000 | 946,284 | ||||||
MMC Norilsk Nickel OJSC via MMC Finance DAC | 750,000 | 782,915 | ||||||
|
| |||||||
3,562,499 | ||||||||
|
| |||||||
United States 0.7% |
| |||||||
JBS Investments II GmbH | 1,000,000 | 987,500 | ||||||
|
| |||||||
Venezuela 1.0% |
| |||||||
Petroleos de Venezuela S.A. (b)(c) | ||||||||
Series Reg S | 3,000,000 | 532,500 | ||||||
6.00%, due 5/16/24 | 2,500,000 | 428,750 | ||||||
6.00%, due 11/15/26 | 2,500,000 | 431,250 | ||||||
|
| |||||||
1,392,500 | ||||||||
|
| |||||||
Total Corporate Bonds | 70,555,410 | |||||||
|
| |||||||
Foreign Government Bonds 42.3% |
| |||||||
Belarus 1.6% |
| |||||||
Republic of Belarus International Bond | 2,000,000 | 2,115,000 | ||||||
|
|
Principal Amount | Value | |||||||
Cameroon, United Republic Of 0.8% |
| |||||||
Republic of Cameroon International Bond | $ | 1,000,000 | $ | 1,040,878 | ||||
|
| |||||||
Croatia 4.1% |
| |||||||
Croatia Government International Bond | ||||||||
Series Reg S | 3,250,000 | 3,500,627 | ||||||
6.375%, due 3/24/21 (a) | 2,000,000 | 2,099,048 | ||||||
|
| |||||||
5,599,675 | ||||||||
|
| |||||||
Dominican Republic 4.0% |
| |||||||
Dominican Republic International Bond | ||||||||
Series Reg S | 5,000,000 | 4,975,000 | ||||||
6.00%, due 7/19/28 (a) | 500,000 | 495,625 | ||||||
|
| |||||||
5,470,625 | ||||||||
|
| |||||||
Ecuador 1.9% |
| |||||||
Ecuador Government International Bond | 3,000,000 | 2,507,100 | ||||||
|
| |||||||
Egypt 1.1% |
| |||||||
Egypt Government Bond | EGP | 31,000,000 |
| 1,519,372 | ||||
|
| |||||||
El Salvador 2.3% |
| |||||||
El Salvador Government International Bond | $ | 3,500,000 | 3,128,125 | |||||
|
| |||||||
Ghana 1.3% |
| |||||||
Ghana Government International Bond | 1,500,000 | 1,798,170 | ||||||
|
| |||||||
Guatemala 2.0% |
| |||||||
Guatemala Government Bond | 3,000,000 | 2,751,960 | ||||||
|
| |||||||
Indonesia 1.4% |
| |||||||
Indonesia Government International Bond | 1,500,000 | 1,409,022 | ||||||
Indonesia Treasury Bond | IDR | 10,000,000,000 | 552,541 | |||||
|
| |||||||
1,961,563 | ||||||||
|
|
12 | MainStay MacKay Emerging Markets Debt Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Principal Amount | Value | |||||||
Foreign Government Bonds (continued) |
| |||||||
Iraq 1.1% |
| |||||||
Iraq International Bond | $ | 1,500,000 | $ | 1,460,190 | ||||
|
| |||||||
Ivory Coast 1.3% |
| |||||||
Ivory Coast Government International Bond | 2,000,000 | 1,730,368 | ||||||
|
| |||||||
Kenya 0.7% |
| |||||||
Kenya Government International Bond | 1,000,000 | 943,100 | ||||||
|
| |||||||
Mexico 1.5% |
| |||||||
Mexican Bonos | MXN | 47,500,000 | 2,034,386 | |||||
|
| |||||||
Nigeria 2.0% |
| |||||||
Nigeria Government International Bond | $ | 3,000,000 | 2,752,620 | |||||
|
| |||||||
Pakistan 0.8% |
| |||||||
Pakistan Government International Bond | 1,000,000 | 1,020,000 | ||||||
|
| |||||||
Paraguay 2.2% |
| |||||||
Paraguay Government International Bond | 3,000,000 | 3,015,000 | ||||||
|
| |||||||
Russia 3.0% |
| |||||||
Russian Federal Bond-OFZ | RUB | 160,000,000 | 2,274,678 | |||||
Russian Foreign Bond | $ | 1,800,000 | 1,775,700 | |||||
|
| |||||||
4,050,378 | ||||||||
|
| |||||||
Saudi Arabia 1.3% |
| |||||||
Saudi Government International Bond | 2,000,000 | 1,812,004 | ||||||
|
|
Principal Amount | Value | |||||||
Senegal 0.9% |
| |||||||
Senegal Government International Bond | $ | 1,250,000 | $ | 1,218,850 | ||||
|
| |||||||
Turkey 1.4% |
| |||||||
Turkey Government International Bond | 2,225,000 | 1,877,344 | ||||||
|
| |||||||
Ukraine 2.7% |
| |||||||
Ukraine Government International Bond | 4,000,000 | 3,615,280 | ||||||
|
| |||||||
Uruguay 1.4% |
| |||||||
Uruguay Government International Bond | 1,500,000 | 1,930,500 | ||||||
|
| |||||||
Venezuela 0.8% |
| |||||||
Venezuela Government International Bond | 4,095,000 | 1,023,750 | ||||||
|
| |||||||
Vietnam 0.7% |
| |||||||
Vietnam Government International Bond | 1,000,000 | 1,005,627 | ||||||
|
| |||||||
Total Foreign Government Bonds | 57,381,865 | |||||||
|
| |||||||
Total Long-Term Bonds | 127,937,275 | |||||||
|
| |||||||
Short-Term Investment 0.5% |
| |||||||
Repurchase Agreement 0.5% |
| |||||||
Fixed Income Clearing Corp. | 688,450 | 688,450 | ||||||
|
| |||||||
Total Short-Term Investment | 688,450 | |||||||
|
| |||||||
Total Investments | 94.8 | % | 128,625,725 | |||||
Other Assets, Less Liabilities | 5.2 | 7,070,377 | ||||||
Net Assets | 100.0 | % | $ | 135,696,102 |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments October 31, 2018 (continued)
† | Percentages indicated are based on Fund net assets. |
(a) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(b) | Issue in default. |
(c) | Issue in non-accrual status. |
The following abbreviations are used in the preceding pages:
EGP—Egyptian Pound
IDR—Indonesian Rupiah
MXN—Mexican Peso
RUB—New Russian Ruble
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets:
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Long-Term Bonds | ||||||||||||||||
Corporate Bonds | $ | — | $ | 70,555,410 | $ | — | $ | 70,555,410 | ||||||||
Foreign Government Bonds | — | 57,381,865 | — | 57,381,865 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Long-Term Bonds | — | 127,937,275 | — | 127,937,275 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Short-Term Investment | ||||||||||||||||
Repurchase Agreement | — | 688,450 | — | 688,450 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | — | $ | 128,625,725 | $ | — | $ | 128,625,725 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
14 | MainStay MacKay Emerging Markets Debt Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2018
Assets | ||||
Investment in securities, at value | $ | 128,625,725 | ||
Cash denominated in foreign currencies | 93,300 | |||
Receivables: | ||||
Investment securities sold | 5,275,801 | |||
Dividends and interest | 2,110,543 | |||
Fund shares sold | 31,011 | |||
Other assets | 37,820 | |||
|
| |||
Total assets | 136,174,200 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 234,991 | |||
Manager (See Note 3) | 89,049 | |||
Transfer agent (See Note 3) | 50,877 | |||
NYLIFE Distributors (See Note 3) | 42,436 | |||
Shareholder communication | 18,185 | |||
Professional fees | 6,837 | |||
Custodian | 6,695 | |||
Trustees | 361 | |||
Accrued expenses | 4,632 | |||
Dividend payable | 24,035 | |||
|
| |||
Total liabilities | 478,098 | |||
|
| |||
Net assets | $ | 135,696,102 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 140,059 | ||
Additional paid-in capital | 158,023,706 | |||
|
| |||
158,163,765 | ||||
Total distributable earnings (loss) | (22,467,663 | ) | ||
|
| |||
Net assets | $ | 135,696,102 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 86,451,892 | ||
|
| |||
Shares of beneficial interest outstanding | 8,907,149 | |||
|
| |||
Net asset value per share outstanding | $ | 9.71 | ||
Maximum sales charge (4.50% of offering price) | 0.46 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.17 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 15,910,612 | ||
|
| |||
Shares of beneficial interest outstanding | 1,623,655 | |||
|
| |||
Net asset value per share outstanding | $ | 9.80 | ||
Maximum sales charge (4.50% of offering price) | 0.46 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.26 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 3,659,727 | ||
|
| |||
Shares of beneficial interest outstanding | 384,282 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.52 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 19,246,055 | ||
|
| |||
Shares of beneficial interest outstanding | 2,018,064 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.54 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 10,427,816 | ||
|
| |||
Shares of beneficial interest outstanding | 1,072,777 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.72 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) | ||||
Income | ||||
Interest (a) | $ | 9,136,862 | ||
Dividend distributions from affiliated investment companies | 21,938 | |||
Securities lending | 1,111 | |||
Other | 551 | |||
|
| |||
Total income | 9,160,462 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 1,185,480 | |||
Distribution/Service—Class A (See Note 3) | 249,505 | |||
Distribution/Service—Investor Class (See Note 3) | 43,193 | |||
Distribution/Service—Class B (See Note 3) | 47,912 | |||
Distribution/Service—Class C (See Note 3) | 242,924 | |||
Transfer agent (See Note 3) | 316,823 | |||
Registration | 87,383 | |||
Professional fees | 77,078 | |||
Shareholder communication | 44,761 | |||
Custodian | 15,793 | |||
Trustees | 3,535 | |||
Miscellaneous | 18,809 | |||
|
| |||
Total expenses before waiver/reimbursement | 2,333,196 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (9,217 | ) | ||
|
| |||
Net expenses | 2,323,979 | |||
|
| |||
Net investment income (loss) | 6,836,483 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions |
| |||
Net realized gain (loss) on: | ||||
Investment transactions | (3,883,407 | ) | ||
Foreign currency forward transactions | (33,163 | ) | ||
Foreign currency transactions | (80,127 | ) | ||
|
| |||
Net realized gain (loss) on investments and foreign currency transactions | (3,996,697 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (14,968,240 | ) | ||
Foreign currency forward contracts | 33,163 | |||
Translation of other assets and liabilities in foreign currencies | 102,434 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (14,832,643 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (18,829,340 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (11,992,857 | ) | |
|
|
(a) | Interest recorded net of foreign withholding taxes in the amount of $41,757. |
16 | MainStay MacKay Emerging Markets Debt Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 6,836,483 | $ | 8,728,593 | ||||
Net realized gain (loss) on investments and foreign currency transactions | (3,996,697 | ) | (966,932 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (14,832,643 | ) | 5,270,354 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (11,992,857 | ) | 13,032,015 | |||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (4,090,630 | ) | ||||||
Investor Class | (669,061 | ) | ||||||
Class B | (150,872 | ) | ||||||
Class C | (772,754 | ) | ||||||
Class I | (718,293 | ) | ||||||
|
| |||||||
(6,401,610 | ) | |||||||
|
| |||||||
Dividends to shareholders from net investment: | ||||||||
Class A | (3,566,533 | ) | ||||||
Investor Class | (810,566 | ) | ||||||
Class B | (187,544 | ) | ||||||
Class C | (864,275 | ) | ||||||
Class I | (522,156 | ) | ||||||
|
| |||||||
(5,951,074 | ) | |||||||
|
| |||||||
Distributions to shareholders from return of capital: | ||||||||
Class A | — | (1,043,496 | ) | |||||
Investor Class | — | (237,155 | ) | |||||
Class B | — | (54,872 | ) | |||||
Class C | — | (252,869 | ) | |||||
Class I | — | (152,773 | ) | |||||
|
| |||||||
— | (1,741,165 | ) | ||||||
|
| |||||||
Total dividends and distributions to shareholders | (6,401,610 | ) | (7,692,239 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 26,866,744 | 43,693,093 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 5,995,352 | 6,890,905 | ||||||
Cost of shares redeemed | (64,621,234 | ) | (69,102,669 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (31,759,138 | ) | (18,518,671 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (50,153,605 | ) | (13,178,895 | ) | ||||
Net Assets | ||||||||
Beginning of year | 185,849,707 | 199,028,602 | ||||||
|
| |||||||
End of year(2) | $ | 135,696,102 | $ | 185,849,707 | ||||
|
|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $(41,199) in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.88 | $ | 10.52 | $ | 9.60 | $ | 11.38 | $ | 11.52 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.45 | 0.53 | 0.57 | 0.62 | 0.68 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.19 | ) | 0.31 | 0.87 | (1.51 | ) | (0.14 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.74 | ) | 0.83 | 1.45 | (0.87 | ) | 0.54 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.43 | ) | (0.36 | ) | (0.29 | ) | (0.63 | ) | (0.65 | ) | ||||||||||
From net realized gain on investments | — | — | — | (0.22 | ) | (0.03 | ) | |||||||||||||
Return of capital | — | (0.11 | ) | (0.24 | ) | (0.06 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.43 | ) | (0.47 | ) | (0.53 | ) | (0.91 | ) | (0.68 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.71 | $ | 10.88 | $ | 10.52 | $ | 9.60 | $ | 11.38 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (6.95 | %) | 8.18 | % | 15.63 | % | (7.54 | %) | 4.85 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 4.36 | % | 5.04 | % | 5.70 | %(c) | 6.18 | % | 5.88 | % | ||||||||||
Net expenses (d) | 1.26 | % | 1.22 | % | 1.22 | %(e) | 1.23 | % | 1.17 | % | ||||||||||
Portfolio turnover rate | 44 | % | 37 | % | 38 | % | 19 | % | 20 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 86,452 | $ | 110,238 | $ | 109,657 | $ | 98,573 | $ | 132,654 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 5.69%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.23%. |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.98 | $ | 10.61 | $ | 9.68 | $ | 11.46 | $ | 11.60 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.43 | 0.52 | 0.55 | 0.61 | 0.66 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.20 | ) | 0.31 | 0.88 | (1.52 | ) | (0.14 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.77 | ) | 0.82 | 1.44 | (0.89 | ) | 0.52 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.41 | ) | (0.35 | ) | (0.27 | ) | (0.61 | ) | (0.63 | ) | ||||||||||
From net realized gain on investments | — | — | — | (0.22 | ) | (0.03 | ) | |||||||||||||
Return of capital | — | (0.10 | ) | (0.24 | ) | (0.06 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.41 | ) | (0.45 | ) | (0.51 | ) | (0.89 | ) | (0.66 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.80 | $ | 10.98 | $ | 10.61 | $ | 9.68 | $ | 11.46 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (7.18 | %) | 7.99 | % | 15.38 | % | (7.66 | %) | 4.64 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 4.15 | % | 4.86 | % | 5.50 | %(c) | 6.01 | % | 5.71 | % | ||||||||||
Net expenses (d) | 1.47 | % | 1.42 | % | 1.42 | %(e) | 1.41 | % | 1.34 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.49 | % | 1.42 | % | 1.42 | % | 1.41 | % | 1.34 | % | ||||||||||
Portfolio turnover rate | 44 | % | 37 | % | 38 | % | 19 | % | 20 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 15,911 | $ | 18,613 | $ | 32,318 | $ | 25,130 | $ | 27,033 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 5.49%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.43%. |
18 | MainStay MacKay Emerging Markets Debt Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.69 | $ | 10.34 | $ | 9.44 | $ | 11.20 | $ | 11.35 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.34 | 0.43 | 0.47 | 0.52 | 0.56 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.18 | ) | 0.30 | 0.86 | (1.48 | ) | (0.13 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | 0.00 | ‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.84 | ) | 0.72 | 1.34 | (0.94 | ) | 0.43 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.33 | ) | (0.29 | ) | (0.20 | ) | (0.54 | ) | (0.55 | ) | ||||||||||
From net realized gain on investments | — | — | — | (0.22 | ) | (0.03 | ) | |||||||||||||
Return of capital | — | (0.08 | ) | (0.24 | ) | (0.06 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.33 | ) | (0.37 | ) | (0.44 | ) | (0.82 | ) | (0.58 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.52 | $ | 10.69 | $ | 10.34 | $ | 9.44 | $ | 11.20 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (7.98 | %) | 7.20 | % | 14.60 | % | (8.36 | %) | 3.87 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 3.37 | % | 4.11 | % | 4.78 | %(c) | 5.24 | % | 4.97 | % | ||||||||||
Net expenses (d) | 2.22 | % | 2.17 | % | 2.17 | %(e) | 2.16 | % | 2.09 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 2.24 | % | 2.17 | % | 2.17 | % | 2.16 | % | 2.09 | % | ||||||||||
Portfolio turnover rate | 44 | % | 37 | % | 38 | % | 19 | % | 20 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 3,660 | $ | 6,012 | $ | 7,506 | $ | 8,111 | $ | 12,109 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 4.77%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 2.18%. |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.70 | $ | 10.35 | $ | 9.45 | $ | 11.22 | $ | 11.37 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.35 | 0.43 | 0.47 | 0.52 | 0.56 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.18 | ) | 0.29 | 0.86 | (1.49 | ) | (0.13 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.00 | )‡ | 0.01 | 0.02 | (0.00 | )‡ | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.83 | ) | 0.72 | 1.34 | (0.95 | ) | 0.43 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.33 | ) | (0.29 | ) | (0.20 | ) | (0.54 | ) | (0.55 | ) | ||||||||||
From net realized gain on investments | — | — | — | (0.22 | ) | (0.03 | ) | |||||||||||||
Return of capital | — | (0.08 | ) | (0.24 | ) | (0.06 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (0.33 | ) | (0.37 | ) | (0.44 | ) | (0.82 | ) | (0.58 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.54 | $ | 10.70 | $ | 10.35 | $ | 9.45 | $ | 11.22 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (7.88 | %) | 7.19 | % | 14.58 | % | (8.43 | %) | 3.87 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 3.39 | % | 4.11 | % | 4.77 | %(c) | 5.24 | % | 4.97 | % | ||||||||||
Net expenses (d) | 2.22 | % | 2.17 | % | 2.17 | %(e) | 2.16 | % | 2.09 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 2.24 | % | 2.17 | % | 2.17 | % | 2.16 | % | 2.09 | % | ||||||||||
Portfolio turnover rate | 44 | % | 37 | % | 38 | % | 19 | % | 20 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 19,246 | $ | 28,270 | $ | 35,789 | $ | 37,808 | $ | 56,199 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 4.76%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 2.18%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class I | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.90 | $ | 10.53 | $ | 9.61 | $ | 11.39 | $ | 11.53 | ||||||||||
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Net investment income (loss) (a) | 0.48 | 0.56 | 0.59 | 0.65 | 0.71 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.20 | ) | 0.32 | 0.88 | (1.52 | ) | (0.14 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.00 | )‡ | (0.01 | ) | 0.01 | 0.02 | (0.00 | )‡ | ||||||||||||
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Total from investment operations | (0.72 | ) | 0.87 | 1.48 | (0.85 | ) | 0.57 | |||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.46 | ) | (0.39 | ) | (0.32 | ) | (0.65 | ) | (0.68 | ) | ||||||||||
From net realized gain on investments | — | — | — | (0.22 | ) | (0.03 | ) | |||||||||||||
Return of capital | — | (0.11 | ) | (0.24 | ) | (0.06 | ) | — | ||||||||||||
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Total dividends and distributions | (0.46 | ) | (0.50 | ) | (0.56 | ) | (0.93 | ) | (0.71 | ) | ||||||||||
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Net asset value at end of year | $ | 9.72 | $ | 10.90 | $ | 10.53 | $ | 9.61 | $ | 11.39 | ||||||||||
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Total investment return (b) | (6.80 | %) | 8.54 | % | 15.90 | % | (7.30 | %) | 5.11 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 4.60 | % | 5.22 | % | 5.96 | %(c) | 6.38 | % | 6.13 | % | ||||||||||
Net expenses (d) | 1.01 | % | 0.97 | % | 0.97 | %(e) | 0.98 | % | 0.92 | % | ||||||||||
Portfolio turnover rate | 44 | % | 37 | % | 38 | % | 19 | % | 20 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 10,428 | $ | 22,717 | $ | 13,759 | $ | 16,825 | $ | 41,174 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 5.95%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 0.98%. |
20 | MainStay MacKay Emerging Markets Debt Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay Emerging Markets Debt Fund (formerly known as MainStay Emerging Markets Debt Fund) (the “Fund”), a “diversified fund” as that term is defined in the 1940 Act as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has seven classes of shares registered for sale. Class A and Class B shares commenced operations on June 1, 1998. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on August 31, 2007. Investor Class shares commenced operations on February 28, 2008. Class R6 and Class T shares were registered for sale effective as of February 28, 2017. As of October 31, 2018, Class R6 and Class T shares were not yet offered for sale. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class T shares
are currently expected to be offered at NAV plus an initial sales charge. Class I shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class and Class T shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Fund’s investment objective is to seek current income. Capital appreciation is a secondary objective.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
21 |
Notes to Financial Statements (continued)
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Benchmark yields | • Reported trades | |
• Broker/dealer quotes | • Issuer spreads | |
• Two-sided markets | • Benchmark securities | |
• Bids/offers | • Reference data (corporate actions or material event notices) | |
• Industry and economic events | • Comparable bonds | |
• Monthly payment information |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation
22 | MainStay MacKay Emerging Markets Debt Fund |
date. These securities are generally categorized as Level 1 in the hierarchy.
Debt securities (other than convertible and municipal bonds) are valued at the evaluated bid prices (evaluated mean prices in the case of convertible and municipal bonds) supplied by a pricing agent or brokers selected by the Manager, in consultation with the Subadvisor. The evaluations are market-based measurements processed through a pricing application and represents the pricing agent’s good faith determination as to what a holder may receive in an orderly transaction under market conditions. The rules based logic utilizes valuation techniques that reflect participants’ assumptions and vary by asset class and per methodology, maximizing the use of relevant observable data including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The evaluated bid or mean prices are deemed by the Manager, in consultation with the Subadvisor, to be representative of market values at the regular close of trading of the Exchange on each valuation date. Debt securities purchased on a delayed delivery basis are marked to market daily until settlement at the forward settlement date. Debt securities, including corporate bonds, U.S. government and federal agency bonds, municipal bonds, foreign bonds, convertible bonds, asset-backed securities and mortgage-backed securities are generally categorized as Level 2 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
Foreign currency forward contracts are valued at their fair market values measured on the basis of the mean between the last current bid and ask prices based on dealer or exchange quotations and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be reclaimable. The Fund will accrue such taxes and reclaims as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income, if any, at least monthly and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Interest income is accrued as earned using the effective interest rate method. Discounts and premiums on securities purchased for the Fund are accreted and amortized, respectively, on the effective interest rate method over the life of the respective securities. Income from payment-in-kind securities, to the extent the Fund held any such securities during the year ended October 31, 2018, is accreted daily based on the effective interest method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
The Fund may place a debt security on non-accrual status and reduce related interest income by ceasing current accruals and writing off all or a portion of any interest receivables when the collection of all or a portion of such interest has become doubtful. A debt security is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can
23 |
Notes to Financial Statements (continued)
be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may increase the costs of investing in mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund.
(I) Foreign Currency Forward Contracts. The Fund may enter into foreign currency forward contracts, which are agreements to buy or sell foreign currencies on a specified future date at a specified rate. The Fund is subject to foreign currency exchange rate risk in the normal course of investing in these transactions. During the period the forward contract is open, changes in the value of the contract are recognized as unrealized appreciation or depreciation by marking to market such contract on a daily basis to reflect the market value of the contract at the end of each day’s trading. Cash movement occurs on settlement date. When the forward contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract. The
Fund may purchase and sell foreign currency forward contracts for purposes of seeking to enhance portfolio returns and manage portfolio risk more efficiently. Foreign currency forward contracts may also be used to gain exposure to a particular currency or to hedge against the risk of loss due to changing currency exchange rates. Foreign currency forward contracts to purchase or sell a foreign currency may also be used in anticipation of future purchases or sales of securities denominated in foreign currency, even if the specific investments have not yet been selected.
The use of foreign currency forward contracts involves, to varying degrees, elements of risk in excess of the amount recognized in the Statement of Assets and Liabilities, including counterparty risk, market risk and illiquidity risk. Counterparty risk is heightened for these instruments because foreign currency forward contracts are not exchange-traded and therefore no clearinghouse or exchange stands ready to meet the obligations under such contracts. Thus, the Fund faces the risk that its counterparties under such contracts may not perform their obligations. Market risk is the risk that the value of a foreign currency forward contract will depreciate due to unfavorable changes in exchange rates. Illiquidity risk arises because the secondary market for foreign currency forward contracts may have less liquidity relative to markets for other securities and financial instruments. Risks also arise from the possible movements in the foreign exchange rates underlying these instruments. While the Fund may enter into forward contracts to reduce currency exchange risks, changes in currency exchange rates may result in poorer overall performance for the Fund than if it had not engaged in such transactions. Exchange rate movements can be large, depending on the currency, and can last for extended periods of time, affecting the value of the Fund’s assets. Moreover, there may be an imperfect correlation between the Fund’s holdings of securities denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving the intended hedge or expose the Fund to the risk of currency exchange loss. The unrealized appreciation (depreciation) on forward contracts also reflects the Fund’s exposure at the valuation date to credit loss in the event of a counterparty’s failure to perform its obligations. As of October 31, 2018, the Fund did not hold any foreign currency forward contracts.
(J) Foreign Currency Transactions. The Fund’s books and records are maintained in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities—at the valuation date; and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency
24 | MainStay MacKay Emerging Markets Debt Fund |
gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(K) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. As of October 31, 2018, the Fund did not have any portfolio securities on loan.
(L) High Yield and General Debt Securities Risk. The Fund’s principal investments include high yield debt securities (commonly referred to as “junk bonds”), which are considered speculative because they present a greater risk of loss, including default, than higher quality debt securities. These securities pay investors a premium—a higher interest rate or yield than investment grade debt securities—because of the increased risk of loss. These securities can also be subject to greater price volatility. In times of unusual or adverse market economic or political conditions, these securities may experience higher than normal default rates.
(M) Foreign Securities Risk. The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. These risks include those resulting from currency fluctuations, future adverse political or economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
(N) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-
party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(O) Quantitative Disclosure of Derivative Holdings. The following tables show additional disclosures related to the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial positions, performance and cash flows. The Fund entered into foreign currency forward contracts to hedge against the risk of loss due to changing currency exchange rates. These derivatives are not accounted for as hedging instruments.
The effect of derivative instruments on the Statement of Operations for the year ended October 31, 2018:
Realized Gain (Loss)
Statement of Operations Location | Foreign Exchange Contracts Risk | Total | ||||||||
Forward Contracts | Net realized gain (loss) on foreign currency forward transactions | $ | (33,163 | ) | $ | (33,163 | ) | |||
|
| |||||||||
Total Realized Gain (Loss) | $ | (33,163 | ) | $ | (33,163 | ) | ||||
|
|
Change in Unrealized Appreciation (Depreciation)
Statement of Operations Location | Foreign Exchange Contracts Risk | Total | ||||||||
Forward Contracts | Net change in unrealized appreciation (depreciation) on foreign currency forward contracts | $ | 33,163 | $ | 33,163 | |||||
|
| |||||||||
Total Change in Unrealized Appreciation (Depreciation) | $ | 33,163 | $ | 33,163 | ||||||
|
|
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the
25 |
Notes to Financial Statements (continued)
responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.70% to $500 million and 0.65% in excess of $500 million, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund accounting agreement furnished at an annual rate of the Fund’s average net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the year ended October 31, 2018, the effective management fee rate was 0.73% inclusive of a fee for fund accounting services of 0.03% of the Fund’s average daily net assets.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019 and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $1,185,480 and voluntarily waived and/or reimbursed certain class specific expenses in the amount of $9,217.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution and Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York
Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class and Class T Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class and Class T shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class and Class T shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
(C) Sales Charges. During the year ended October 31, 2018, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $16,938 and $4,467, respectively.
During the year ended October 31, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $2,681, $23, $4,569 and $804, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 127,247 | ||
Investor Class | 62,586 | |||
Class B | 17,340 | |||
Class C | 87,990 | |||
Class I | 21,660 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
26 | MainStay MacKay Emerging Markets Debt Fund |
(F) Investments in Affiliates (in 000’s). During the year ended October 31, 2018, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Companies | Value, Beginning of Year | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Year | Dividend Income | Other Distributions | Shares End of Year | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | — | $ | 22,777 | $ | (22,777 | ) | $ | — | $ | — | $ | — | $ | 22 | $ | — | — |
Note 4–Federal Income Tax
As of October 31, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||
Investments in Securities | $138,334,206 | $1,838,350 | $(11,546,831) | $(9,708,481) |
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary Income | Accumulated Capital and Other Gain (Loss) | Other Temporary Differences | Unrealized Appreciation (Depreciation) | Total Accumulated Gain (Loss) | ||||
$475,109 | $(12,648,347) | $(581,924) | $(9,712,501) | $(22,467,663) |
The other temporary differences are primarily due to interest accruals on defaulted securities.
The following table discloses the current year reclassifications between total distributable earnings (loss) and additional paid-in capital arising from permanent differences; net assets as of October 31, 2018 were not affected.
Total Distributable Earnings (Loss) | Additional Paid-In Capital | |
$5,762 | $(5,762) |
The reclassifications for the Fund are primarily due to non-deductible excise taxes paid.
As of October 31, 2018, for federal income tax purposes, capital loss carryforwards of $12,648,347 were available as shown in the table below, to the extent provided by the regulations to offset future realized gains of the Fund through the years indicated. To the extent that these capital loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders. No capital gain distributions shall be made until any capital loss carryforwards have been fully utilized or expired.
Capital Loss Available Through | Short-Term Capital Loss Amounts (000’s) | Long-Term Capital Loss Amounts (000’s) | ||||||
Unlimited | $ | — | $ | 12,648 |
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 6,401,610 | $ | 5,951,074 | ||||
Return of Capital | — | 1,741,165 | ||||||
Total | $ | 6,401,610 | $ | 7,692,239 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to July 31, 2018, the aggregate commitment amount and the commitment fee were the same as those under the current Credit Agreement. During the year ended October 31, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow
27 |
Notes to Financial Statements (continued)
money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the year ended October 31, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2018, purchases and sales of securities, other than short-term securities, were $69,594 and $102,673, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,033,435 | $ | 10,727,445 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 371,003 | 3,815,066 | ||||||
Shares redeemed | (2,685,777 | ) | (27,743,123 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (1,281,339 | ) | (13,200,612 | ) | ||||
Shares converted into Class A (See Note 1) | 120,973 | 1,265,379 | ||||||
Shares converted from Class A (See Note 1) | (62,221 | ) | (638,453 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,222,587 | ) | $ | (12,573,686 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,720,190 | $ | 18,241,855 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 391,795 | 4,118,552 | ||||||
Shares redeemed | (3,187,906 | ) | (33,535,669 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (1,075,921 | ) | (11,175,262 | ) | ||||
Shares converted into Class A (See Note 1) | 845,728 | 9,165,350 | ||||||
Shares converted from Class A (See Note 1) | (65,390 | ) | (688,356 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (295,583 | ) | $ | (2,698,268 | ) | |||
|
|
|
| |||||
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 107,694 | $ | 1,135,613 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 63,477 | 658,302 | ||||||
Shares redeemed | (246,848 | ) | (2,577,946 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (75,677 | ) | (784,031 | ) | ||||
Shares converted into Investor Class (See Note 1) | 107,684 | 1,120,234 | ||||||
Shares converted from Investor Class (See Note 1) | (103,096 | ) | (1,088,826 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (71,089 | ) | $ | (752,623 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 206,404 | $ | 2,189,642 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 97,225 | 1,028,872 | ||||||
Shares redeemed | (926,723 | ) | (9,604,953 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (623,094 | ) | (6,386,439 | ) | ||||
Shares converted into Investor Class (See Note 1) | 101,894 | 1,087,744 | ||||||
Shares converted from Investor Class (See Note 1) | (829,412 | ) | (9,072,093 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (1,350,612 | ) | $ | (14,370,788 | ) | |||
|
|
|
|
Class B | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 11,487 | $ | 117,997 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 13,374 | 135,164 | ||||||
Shares redeemed | (138,705 | ) | (1,411,323 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (113,844 | ) | (1,158,162 | ) | ||||
Shares converted from Class B (See Note 1) | (64,534 | ) | (658,334 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (178,378 | ) | $ | (1,816,496 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 38,191 | $ | 390,440 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 21,259 | 218,872 | ||||||
Shares redeemed | (150,945 | ) | (1,558,335 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (91,495 | ) | (949,023 | ) | ||||
Shares converted from Class B (See Note 1) | (72,105 | ) | (749,331 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (163,600 | ) | $ | (1,698,354 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 147,944 | $ | 1,506,123 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 70,549 | 713,019 | ||||||
Shares redeemed | (841,462 | ) | (8,512,109 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (622,969 | ) | (6,292,967 | ) | ||||
Shares converted from Class C (See Note 1) | (1,151 | ) | (12,281 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (624,120 | ) | $ | (6,305,248 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 234,518 | $ | 2,424,850 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 94,874 | 978,127 | ||||||
Shares redeemed | (1,144,331 | ) | (11,808,340 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (814,939 | ) | (8,405,363 | ) | ||||
Shares converted from Class C (See Note 1) | (1,261 | ) | (13,330 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (816,200 | ) | $ | (8,418,693 | ) | |||
|
|
|
| |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,296,637 | $ | 13,379,566 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 65,366 | 673,801 | ||||||
Shares redeemed | (2,375,313 | ) | (24,376,733 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (1,013,310 | ) | (10,323,366 | ) | ||||
Shares converted into Class I (See Note 1) | 1,130 | 12,281 | ||||||
|
|
|
| |||||
Net increase (decrease) | (1,012,180 | ) | $ | (10,311,085 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,896,970 | $ | 20,446,306 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 51,546 | 546,482 | ||||||
Shares redeemed | (1,196,200 | ) | (12,595,372 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 752,316 | 8,397,416 | ||||||
Shares converted into Class I (See Note 1) | 25,884 | 270,016 | ||||||
|
|
|
| |||||
Net increase (decrease) | 778,200 | $ | 8,667,432 | |||||
|
|
|
|
28 | MainStay MacKay Emerging Markets Debt Fund |
Note 10–Recent Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, which amends the amortization period for certain callable debt securities that are held at a premium. The amendment requires the premium to be amortized to the earliest call date. This amendment does not require an accounting change for securities held at a discount. This guidance is effective for fiscal years beginning after December 15, 2018. Management is currently evaluating the potential impact of this guidance to the financial statements.
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
29 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The MainStay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MainStay MacKay Emerging Markets Debt Fund (formerly, MainStay Emerging Markets Debt Fund) (the Fund), one of the funds constituting The MainStay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
30 | MainStay MacKay Emerging Markets Debt Fund |
Federal Income Tax Information
(Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders in a written statement as to the federal tax status of dividends paid by the Fund during such fiscal years.
For the fiscal year ended October 31, 2018, the Fund designated approximately $4,094 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
31 |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
32 | MainStay MacKay Emerging Markets Debt Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
33 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
34 | MainStay MacKay Emerging Markets Debt Fund |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
* | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
35 |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1717391 MS293-18 | MSEMD11-12/18 (NYLIM) NL218 |
MainStay MacKay International Equity Fund (Formerly known as MainStay International Equity Fund)
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception Date | One Year | Five Years | Ten Years | Gross Expense Ratio3 | ||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 1/3/1995 | | –10.21 –4.98 | %
| | 2.18 3.34 | %
| | 4.99 5.59 | %
| | 1.34 1.34 | %
| |||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | –10.52 –5.31 |
| | 1.82 2.98 |
| | 4.65 5.25 |
| | 1.69 1.69 |
| |||||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 9/13/1994 | | –10.68 –5.98 |
| | 1.85 2.22 |
| | 4.46 4.46 |
| | 2.44 2.44 |
| |||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | 9/1/1998 | | –6.98 –6.04 |
| | 2.22 2.22 |
| | 4.45 4.45 |
| | 2.44 2.44 |
| |||||||||
Class I Shares | No Sales Charge | 1/2/2004 | –4.80 | 3.60 | 5.86 | 1.09 | ||||||||||||||||||
Class R1 Shares | No Sales Charge | 1/2/2004 | –4.86 | 3.49 | 5.76 | 1.19 | ||||||||||||||||||
Class R2 Shares | No Sales Charge | 1/2/2004 | –5.12 | 3.24 | 5.50 | 1.44 | ||||||||||||||||||
Class R3 Shares | No Sales Charge | 4/28/2006 | –5.32 | 2.99 | 5.23 | 1.69 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
MSCI ACWI® Ex U.S. Index4 | –8.24 | % | 1.63 | % | 6.92 | % | ||||||
MSCI EAFE® Index5 | –6.85 | 2.02 | 6.89 | |||||||||
Morningstar Foreign Large Growth Category Average6 | –7.67 | 3.03 | 7.94 |
4. | The Fund has selected the MSCI ACWI® Ex U.S. Index as its primary broad-based securities market index. The MSCI ACWI® Ex U.S. Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the U.S. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
5. | The MSCI EAFE® Index is the Fund’s secondary benchmark. The MSCI EAFE® Index consists of international stocks representing the developed world outside of North America. Results assume reinvestment of all income and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Foreign Large Growth Category Average is representative of funds that focus on high-priced growth stocks, mainly outside of the United States. Most of these portfolios divide their assets among a dozen or more developed markets, including Japan, Britain, France, and Germany. These portfolios primarily invest in stocks that have market caps in the top 70% of each economically integrated market and will have less than 20% of assets invested in U.S. stocks. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay International Equity Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay International Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 10/31/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 903.20 | $ | 6.33 | $ | 1,018.55 | $ | 6.72 | 1.32% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 901.50 | $ | 7.96 | $ | 1,016.84 | $ | 8.44 | 1.66% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 898.20 | $ | 11.53 | $ | 1,013.06 | $ | 12.23 | 2.41% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 898.20 | $ | 11.53 | $ | 1,013.06 | $ | 12.23 | 2.41% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 904.20 | $ | 5.14 | $ | 1,019.81 | $ | 5.45 | 1.07% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 903.70 | $ | 5.61 | $ | 1,019.31 | $ | 5.96 | 1.17% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 902.90 | $ | 6.81 | $ | 1,018.05 | $ | 7.22 | 1.42% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 901.60 | $ | 8.00 | $ | 1,016.79 | $ | 8.49 | 1.67% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Country Composition as of October 31, 2018 (Unaudited)
United Kingdom | 19.8 | % | ||
Japan | 10.9 | |||
Germany | 10.7 | |||
Spain | 6.9 | |||
Ireland | 6.4 | |||
Netherlands | 5.7 | |||
United States | 5.7 | |||
Canada | 5.1 | |||
Switzerland | 4.9 | |||
India | 4.1 |
Sweden | 2.8 | % | ||
China | 2.7 | |||
Taiwan | 2.7 | |||
Denmark | 2.5 | |||
France | 1.8 | |||
Mexico | 1.2 | |||
Italy | 1.0 | |||
Other Assets, Less Liabilities | 5.1 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 10 for specific holdings within these categories. The Fund’s portfolio is subject to change.
Top Ten Holdings as of October 31, 2018 (excluding short-term investment) (Unaudited)
1. | Prudential PLC |
2. | ZOZO, Inc. |
3. | United Internet A.G., Registered |
4. | TE Connectivity, Ltd. |
5. | Grifols S.A. |
6. | Shire PLC |
7. | ICON PLC |
8. | Fresenius Medical Care A.G. & Co. KGaA |
9. | Housing Development Finance Corp., Ltd. |
10. | Scout24 A.G. |
8 | MainStay MacKay International Equity Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Carlos Garcia-Tunon, CFA, Ian Murdoch and Lawrence Rosenberg of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay International Equity Fund perform relative to its benchmarks and peer group during the 12 months ended October 31, 2018?
For the 12 months ended October 31, 2018, Class I shares of MainStay MacKay International Equity Fund returned –4.80%, outperforming the –8.24% return of the Fund’s primary benchmark, the MSCI ACWI® Ex U.S. Index and the –6.85% return of the Fund’s secondary benchmark, the MSCI EAFE® Index. Over the same period, Class I shares also outperformed the –7.67% return of the Morningstar Foreign Large Growth Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
The Fund’s outperformance of its primary benchmark, the MSCI ACWI® Ex U.S. Index, during the reporting period was underpinned by positive stock selection on both a sector and country basis. On a sector level, stock selection was strongest within the information technology, industrials and consumer discretionary sectors. On a country level, stock selection was strongest within Germany, Ireland and Japan.
Country allocation also was a positive contributor to the Fund’s relative performance, driven mainly by the Fund’s overweight allocation to Ireland and its underweight allocation to South Korea and China. Sector allocation was broadly neutral overall. Benefits from the Fund’s overweight allocation to the health care sector, and underweight allocations to the financials and industrials sectors, was offset by an underweight allocation to the energy sector and overweight allocations to the information technology and communication services sectors.
Were there any changes to the Fund during the reporting period?
Effective January 1, 2018, MacKay Shields assumed subadvisory responsibilities for the Fund, and the portfolio managers from Cornerstone Capital Management Holdings LLC transitioned to MacKay Shields. Effective February 28, 2018, the Fund was renamed MainStay MacKay International Equity Fund. For more information on these changes, please refer to the supplements dated September 28, 2017, and December 15, 2017.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, the strongest positive contributors to the Fund’s relative performance were the information
technology, consumer discretionary and health care sectors. (Contributions take weightings and total returns into account.) During the same period, the weakest contributors to relative performance were the financials, energy and consumer staples sectors.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
During the reporting period, the individual stocks that made the strongest positive contributions to the Fund’s absolute performance were German Internet payment and processing firm Wirecard, U.K. medical technology company LivaNova and Japanese Internet-based services provider CyberAgent. The stocks that detracted the most from the Fund’s absolute performance during the same period were Italian financial services provider Banca IFIS, Chinese Internet value-added service provider Tencent and German Internet access provider United Internet. These stocks remain in the Fund as of the end of the reporting period.
What were some of the Fund’s largest purchases and sales during the reporting period?
Over the reporting period, the Fund’s largest initial purchase was in Chinese Internet value-added service provider Tencent, while the largest increased purchase was in German online real estate and automotive marketplace provider Scout24. The Fund’s largest full sale was in Israeli software producer Check Point Software Technology, while the largest decreased position size was in Japanese Internet-based services provider CyberAgent.
How did the Fund’s sector weightings change during the reporting period?
The Fund’s largest increases in sector exposures relative to the MSCI ACWI® Ex U.S. Index were in the communication services and financials sectors. Conversely, the Fund’s largest sector decreases relative to the benchmark were in the information technology and health care sectors.
How was the Fund positioned at the end of the reporting period?
Relative to the MSCI ACWI® Ex U.S. Index, the Fund ended the reporting period overweight in the health care and information technology sectors and underweight in the energy and financials sectors.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
9 |
Portfolio of Investments October 31, 2018
Shares | Value | |||||||
Common Stocks 94.7%† |
| |||||||
Canada 5.1% |
| |||||||
Bank of Nova Scotia (Banks) | 158,126 | $ | 8,486,157 | |||||
Constellation Software, Inc. (Software) | 10,782 | 7,420,411 | ||||||
|
| |||||||
15,906,568 | ||||||||
|
| |||||||
China 2.7% | ||||||||
Tencent Holdings, Ltd. (Interactive Media & Services) | 247,835 | 8,438,200 | ||||||
|
| |||||||
Denmark 2.5% | ||||||||
Novo Nordisk A/S, Class B (Pharmaceuticals) | 180,383 | 7,802,019 | ||||||
|
| |||||||
France 1.8% | ||||||||
Teleperformance (Professional Services) | 34,014 | 5,609,381 | ||||||
|
| |||||||
Germany 10.7% | ||||||||
Fresenius Medical Care A.G. & Co. KGaA (Health Care Providers & Services) | 112,399 | 8,825,043 | ||||||
Scout24 A.G. (Interactive Media & Services) (a) | 210,719 | 8,749,677 | ||||||
United Internet A.G., Registered (Diversified Telecommunication Services) | 251,410 | 10,416,507 | ||||||
Wirecard A.G. (IT Services) | 26,982 | 5,054,818 | ||||||
|
| |||||||
33,046,045 | ||||||||
|
| |||||||
India 4.1% | ||||||||
Housing Development Finance Corp., Ltd. (Thrifts & Mortgage Finance) | 368,240 | 8,800,510 | ||||||
Yes Bank, Ltd. (Banks) | 1,522,390 | 3,877,776 | ||||||
|
| |||||||
12,678,286 | ||||||||
|
| |||||||
Ireland 6.4% | ||||||||
Accenture PLC, Class A (IT Services) | 52,857 | 8,331,320 | ||||||
ICON PLC (Life Sciences Tools & Services) (c) | 64,844 | 8,953,659 | ||||||
Paddy Power Betfair PLC (Hotels, Restaurants & Leisure) | 27,844 | 2,403,159 | ||||||
|
| |||||||
19,688,139 | ||||||||
|
| |||||||
Italy 1.0% | ||||||||
Banca IFIS S.p.A. (Diversified Financial Services) | 181,576 | 3,195,989 | ||||||
|
| |||||||
Japan 10.9% | ||||||||
CyberAgent, Inc. (Media) | 64,100 | 2,721,133 | ||||||
Lion Corp. (Household Products) | 350,000 | 6,575,974 | ||||||
Relo Group, Inc. (Real Estate Management & Development) | 234,600 | 5,542,993 | ||||||
Tsuruha Holdings, Inc. (Food & Staples Retailing) | 78,488 | 8,180,253 | ||||||
ZOZO, Inc. (Internet & Direct Marketing Retail) | 442,496 | 10,662,885 | ||||||
|
| |||||||
33,683,238 | ||||||||
|
|
Shares | Value | |||||||
Mexico 1.2% |
| |||||||
Regional S.A.B. de C.V. (Banks) | 735,587 | $ | 3,623,753 | |||||
|
| |||||||
Netherlands 5.7% |
| |||||||
GrandVision N.V. (Specialty Retail) (a) | 183,249 | 4,636,824 | ||||||
IMCD N.V. (Trading Companies & Distributors) | 67,583 | 4,589,047 | ||||||
Koninklijke Philips N.V. (Health Care Equipment & Supplies) | 222,873 | 8,310,232 | ||||||
|
| |||||||
17,536,103 | ||||||||
|
| |||||||
Spain 6.9% |
| |||||||
Amadeus IT Group S.A. (IT Services) | 50,394 | 4,062,868 | ||||||
Grifols S.A. (Biotechnology) | 335,923 | 9,584,374 | ||||||
Industria de Diseno Textil S.A. (Specialty Retail) (b) | 277,044 | 7,822,884 | ||||||
|
| |||||||
21,470,126 | ||||||||
|
| |||||||
Sweden 2.8% | ||||||||
Hexagon AB, Class B (Electronic Equipment, Instruments & Components) | 174,024 | 8,530,859 | ||||||
|
| |||||||
Switzerland 4.9% |
| |||||||
DKSH Holding A.G. (Professional Services) | 52,648 | 3,552,035 | ||||||
TE Connectivity, Ltd. (Electronic Equipment, Instruments & Components) | 133,195 | 10,045,567 | ||||||
Tecan Group A.G., Registered (Life Sciences Tools & Services) | 7,397 | 1,668,667 | ||||||
|
| |||||||
15,266,269 | ||||||||
|
| |||||||
Taiwan 2.7% | ||||||||
Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR (Semiconductors & Semiconductor Equipment) | 218,614 | 8,329,193 | ||||||
|
| |||||||
United Kingdom 19.8% |
| |||||||
Big Yellow Group PLC (Equity Real Estate Investment Trusts) | 266,029 | 2,932,831 | ||||||
BTG PLC (Pharmaceuticals) (c) | 749,463 | 5,287,960 | ||||||
Experian PLC (Professional Services) | 291,766 | 6,722,160 | ||||||
HomeServe PLC (Commercial Services & Supplies) | 411,411 | 5,003,612 | ||||||
Johnson Matthey PLC (Chemicals) | 206,032 | 7,829,400 | ||||||
LivaNova PLC (Health Care Equipment & Supplies) (c) | 50,645 | 5,671,734 | ||||||
Prudential PLC (Insurance) | 541,359 | 10,867,314 | ||||||
St. James’s Place PLC (Capital Markets) | 632,276 | 8,190,858 | ||||||
Whitbread PLC (Hotels, Restaurants & Leisure) | 153,362 | 8,625,204 | ||||||
|
| |||||||
61,131,072 | ||||||||
|
| |||||||
United States 5.5% |
| |||||||
Samsonite International S.A. (Textiles, Apparel & Luxury Goods) (a)(c) | 2,678,412 | 7,684,858 | ||||||
Shire PLC (Biotechnology) | 154,651 | 9,252,176 | ||||||
|
| |||||||
16,937,034 | ||||||||
|
| |||||||
Total Common Stocks | 292,872,274 | |||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 10 |
Shares | Value | |||||||
Short-Term Investment 0.2% |
| |||||||
Affiliated Investment Company 0.2% | ||||||||
United States 0.2% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.075% (d) | 615,270 | $ | 615,270 | |||||
|
| |||||||
Total Short-Term Investment | 615,270 | |||||||
|
| |||||||
Total Investments | 94.9 | % | 293,487,544 | |||||
Other Assets, Less Liabilities | 5.1 | 15,658,257 | ||||||
Net Assets | 100.0 | % | $ | 309,145,801 |
† | Percentages indicated are based on Fund net assets. |
(a) | May be sold to institutional investors only under Rule 144A or securities offered pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. |
(b) | All or a portion of this security was held on loan. As of October 31, 2018, the market value of securities loaned was $7,033,733 and the Fund received non-cash collateral in the amount of $7,455,236 (See Note 2(I)). |
(c) | Non-income producing security. |
(d) | Current yield as of October 31, 2018. |
The following abbreviation is used in the preceding pages:
ADR—American Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets:
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 292,872,274 | $ | — | $ | — | $ | 292,872,274 | ||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 615,270 | — | — | 615,270 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 293,487,544 | $ | — | $ | — | $ | 293,487,544 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of Investments October 31, 2018 (continued)
The table below sets forth the diversification of MainStay MacKay International Equity Fund investments by industry.
Industry Diversification (Unaudited)
Value | Percent † | |||||||
Banks | $ | 15,987,686 | 5.2 | % | ||||
Biotechnology | 18,836,550 | 6.1 | ||||||
Capital Markets | 8,190,858 | 2.7 | ||||||
Chemicals | 7,829,400 | 2.5 | ||||||
Commercial Services & Supplies | 5,003,612 | 1.6 | ||||||
Diversified Financial Services | 3,195,989 | 1.0 | ||||||
Diversified Telecommunication Services | 10,416,507 | 3.4 | ||||||
Electronic Equipment, Instruments & Components | 18,576,426 | 6.0 | ||||||
Equity Real Estate Investment Trusts | 2,932,831 | 1.0 | ||||||
Food & Staples Retailing | 8,180,253 | 2.6 | ||||||
Health Care Equipment & Supplies | 13,981,966 | 4.5 | ||||||
Health Care Providers & Services | 8,825,043 | 2.9 | ||||||
Hotels, Restaurants & Leisure | 11,028,363 | 3.6 | ||||||
Household Products | 6,575,974 | 2.1 | ||||||
Insurance | 10,867,314 | 3.5 | ||||||
Interactive Media & Services | 17,187,877 | 5.6 | ||||||
Internet & Direct Marketing Retail | 10,662,885 | 3.5 | ||||||
IT Services | 17,449,006 | 5.6 | ||||||
Life Sciences Tools & Services | 10,622,326 | 3.4 | ||||||
Media | 2,721,133 | 0.9 | ||||||
Pharmaceuticals | 13,089,979 | 4.2 | ||||||
Professional Services | 15,883,576 | 5.1 | ||||||
Real Estate Management & Development | 5,542,993 | 1.8 | ||||||
Semiconductors & Semiconductor Equipment | 8,329,193 | 2.7 | ||||||
Software | 7,420,411 | 2.4 | ||||||
Specialty Retail | 12,459,708 | 4.0 | ||||||
Textiles, Apparel & Luxury Goods | 7,684,858 | 2.5 | ||||||
Thrifts & Mortgage Finance | 8,800,510 | 2.8 | ||||||
Trading Companies & Distributors | 4,589,047 | 1.5 | ||||||
|
|
|
| |||||
293,487,544 | 94.9 | |||||||
Short-Term Investment | 615,270 | 0.2 | ||||||
Other Assets, Less Liabilities | 15,658,257 | 5.1 | ||||||
|
|
|
| |||||
Net Assets | $ | 309,145,801 | 100.0 | % | ||||
|
|
|
|
† | Percentages indicated are based on Fund net assets. |
12 | MainStay MacKay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2018
Assets |
| |||
Investment in securities, at value (identified cost $291,118,373) including securities on loan of $7,033,733 | $ | 292,872,274 | ||
Investment in affiliated investment companies, at value (identified cost $615,270) | 615,270 | |||
Cash denominated in foreign currencies (identified cost $15,833,668) | 15,623,514 | |||
Receivables: | ||||
Dividends and interest | 558,835 | |||
Fund shares sold | 69,605 | |||
Securities lending income | 433 | |||
Other assets | 40,935 | |||
|
| |||
Total assets | 309,780,866 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Manager (See Note 3) | 242,674 | |||
Fund shares redeemed | 234,636 | |||
Transfer agent (See Note 3) | 59,010 | |||
Custodian | 40,866 | |||
NYLIFE Distributors (See Note 3) | 28,722 | |||
Shareholder communication | 17,219 | |||
Professional fees | 9,307 | |||
Trustees | 842 | |||
Investment securities purchased | 15 | |||
Accrued expenses | 1,774 | |||
|
| |||
Total liabilities | 635,065 | |||
|
| |||
Net assets | $ | 309,145,801 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 199,939 | ||
Additional paid-in capital | 306,796,949 | |||
|
| |||
306,996,888 | ||||
Total distributable earnings (loss) | 2,148,913 | |||
|
| |||
Net assets | $ | 309,145,801 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 59,303,808 | ||
|
| |||
Shares of beneficial interest outstanding | 3,830,914 | |||
|
| |||
Net asset value per share outstanding | $ | 15.48 | ||
Maximum sales charge (5.50% of offering price) | 0.90 | |||
|
| |||
Maximum offering price per share outstanding | $ | 16.38 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 21,679,421 | ||
|
| |||
Shares of beneficial interest outstanding | 1,409,816 | |||
|
| |||
Net asset value per share outstanding | $ | 15.38 | ||
Maximum sales charge (5.50% of offering price) | 0.90 | |||
|
| |||
Maximum offering price per share outstanding | $ | 16.28 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 4,404,318 | ||
|
| |||
Shares of beneficial interest outstanding | 322,041 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 13.68 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 6,960,156 | ||
|
| |||
Shares of beneficial interest outstanding | 508,838 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 13.68 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 213,029,666 | ||
|
| |||
Shares of beneficial interest outstanding | 13,678,582 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 15.57 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 2,109,264 | ||
|
| |||
Shares of beneficial interest outstanding | 136,242 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 15.48 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 602,219 | ||
|
| |||
Shares of beneficial interest outstanding | 38,808 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 15.52 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 1,056,949 | ||
|
| |||
Shares of beneficial interest outstanding | 68,702 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 15.38 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) |
| |||
Income | ||||
Dividends—Unaffiliated (a) | $ | 4,904,900 | ||
Securities lending | 23,532 | |||
Interest | 19,500 | |||
Dividends—Affiliated | 3,768 | |||
Other | 1,048 | |||
|
| |||
Total income | 4,952,748 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 2,964,590 | |||
Distribution/Service—Class A (See Note 3) | 156,000 | |||
Distribution/Service—Investor Class (See Note 3) | 62,735 | |||
Distribution/Service—Class B (See Note 3) | 56,011 | |||
Distribution/Service—Class C (See Note 3) | 81,037 | |||
Distribution/Service—Class R2 (See Note 3) | 2,194 | |||
Distribution/Service—Class R3 (See Note 3) | 6,556 | |||
Transfer agent (See Note 3) | 356,656 | |||
Registration | 106,234 | |||
Custodian | 95,732 | |||
Professional fees | 93,107 | |||
Shareholder communication | 46,633 | |||
Trustees | 7,334 | |||
Shareholder service (See Note 3) | 4,676 | |||
Miscellaneous | 32,634 | |||
|
| |||
Total expenses before waiver/reimbursement | 4,072,129 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (15,314 | ) | ||
|
| |||
Net expenses | 4,056,815 | |||
|
| |||
Net investment income (loss) | 895,933 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions |
| |||
Net realized gain (loss) on: | ||||
Investment transactions (b) | 38,243,187 | |||
Foreign currency transactions | (25,939 | ) | ||
|
| |||
Net realized gain (loss) on investments and foreign currency transactions | 38,217,248 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (c) | (55,481,894 | ) | ||
Translation of other assets and liabilities in foreign currencies | (94,214 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (55,576,108 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | (17,358,860 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | (16,462,927 | ) | |
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $442,816. |
(b) | Realized gain (loss) on security transactions recorded net of foreign capital gains tax in the amount of $300,294. |
(c) | Net change in unrealized appreciation (depreciation) on investments recorded net of foreign capital gains tax in the amount of $240,602. |
14 | MainStay MacKay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 895,933 | $ | 376,014 | ||||
Net realized gain (loss) on investments and foreign currency transactions | 38,217,248 | 23,740,798 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (55,576,108 | ) | 31,909,745 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | (16,462,927 | ) | 56,026,557 | |||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (306,159 | ) | ||||||
Investor Class | (44,461 | ) | ||||||
Class I | (1,621,018 | ) | ||||||
Class R1 | (17,860 | ) | ||||||
Class R2 | (5,543 | ) | ||||||
Class R3 | (2,963 | ) | ||||||
|
| |||||||
(1,998,004 | ) | |||||||
|
| |||||||
Dividends to shareholders from net investment income: | ||||||||
Class A | (109,089 | ) | ||||||
Class I | (939,444 | ) | ||||||
Class R1 | (10,000 | ) | ||||||
Class R2 | (1,310 | ) | ||||||
|
| |||||||
(1,059,843 | ) | |||||||
|
| |||||||
Total dividends and distributions to shareholders | (1,998,004 | ) | (1,059,843 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 84,138,632 | 38,670,309 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 1,980,858 | 1,054,329 | ||||||
Cost of shares redeemed | (62,141,023 | ) | (63,024,436 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | 23,978,467 | (23,299,798 | ) | |||||
|
| |||||||
Net increase (decrease) in net assets | 5,517,536 | 31,666,916 | ||||||
Net Assets |
| |||||||
Beginning of year | 303,628,265 | 271,961,349 | ||||||
|
| |||||||
End of year(2) | $ | 309,145,801 | $ | 303,628,265 | ||||
|
|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $(391,642) in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | $ | 13.37 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.03 | 0.00 | ‡ | 0.04 | 0.03 | 0.07 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.83 | ) | 2.90 | (0.04 | ) | 0.49 | (0.26 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.81 | ) | 2.91 | 0.01 | 0.49 | (0.23 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.09 | ) | (0.04 | ) | (0.01 | ) | (0.09 | ) | (0.03 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 15.48 | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (4.98 | %) | 21.59 | % | 0.05 | % | 3.78 | % | (1.76 | %) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.17 | % | 0.01 | % | 0.28 | %(c) | 0.20 | % | 0.51 | % | ||||||||||
Net expenses (d) | 1.32 | % | 1.34 | % | 1.32 | %(e) | 1.33 | % | 1.34 | % | ||||||||||
Portfolio turnover rate | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 59,304 | $ | 54,553 | $ | 41,891 | $ | 43,405 | $ | 45,882 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.27%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.33%. |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 16.27 | $ | 13.43 | $ | 13.47 | $ | 13.07 | $ | 13.35 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.03 | ) | (0.04 | ) | (0.01 | ) | (0.02 | ) | 0.03 | |||||||||||
Net realized and unrealized gain (loss) on investments | (0.82 | ) | 2.87 | (0.04 | ) | 0.50 | (0.27 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.86 | ) | 2.84 | (0.04 | ) | 0.45 | (0.28 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.03 | ) | — | — | (0.05 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 15.38 | $ | 16.27 | $ | 13.43 | $ | 13.47 | $ | 13.07 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (5.31 | %) | 21.15 | % | (0.30 | %) | 3.43 | % | (2.10 | %) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.19 | %) | (0.26 | %) | (0.11 | %)(c) | (0.14 | %) | 0.19 | % | ||||||||||
Net expenses (d) | 1.66 | % | 1.69 | % | 1.69 | % (e) | 1.68 | % | 1.67 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.70 | % | 1.69 | % | 1.69 | % (e) | 1.68 | % | 1.67 | % | ||||||||||
Portfolio turnover rate | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 21,679 | $ | 25,029 | $ | 31,523 | $ | 34,329 | $ | 34,377 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been (0.12)%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.70%. |
16 | MainStay MacKay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 14.55 | $ | 12.10 | $ | 12.23 | $ | 11.91 | $ | 12.26 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.14 | ) | (0.14 | ) | (0.10 | ) | (0.11 | ) | (0.07 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | (0.72 | ) | 2.58 | (0.04 | ) | 0.46 | (0.24 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.87 | ) | 2.45 | (0.13 | ) | 0.32 | (0.35 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 13.68 | $ | 14.55 | $ | 12.10 | $ | 12.23 | $ | 11.91 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (5.98 | %) | 20.25 | % | (1.06 | %) | 2.69 | % | (2.85 | %) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.95 | %) | (1.05 | %) | (0.86 | %)(c) | (0.91 | %) | (0.57 | %) | ||||||||||
Net expenses (d) | 2.41 | % | 2.44 | % | 2.44 | % (e) | 2.43 | % | 2.42 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 2.44 | % | 2.44 | % | 2.44 | % (e) | 2.43 | % | 2.42 | % | ||||||||||
Portfolio turnover rate | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 4,404 | $ | 6,210 | $ | 6,991 | $ | 8,982 | $ | 11,058 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been (0.87)%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 2.45%. |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 14.56 | $ | 12.10 | $ | 12.23 | $ | 11.92 | $ | 12.26 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.14 | ) | (0.14 | ) | (0.10 | ) | (0.11 | ) | (0.07 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | (0.73 | ) | 2.59 | (0.04 | ) | 0.45 | (0.24 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.03 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.88 | ) | 2.46 | (0.13 | ) | 0.31 | (0.34 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 13.68 | $ | 14.56 | $ | 12.10 | $ | 12.23 | $ | 11.92 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (6.04 | %) | 20.33 | % | (1.06 | %) | 2.60 | % | (2.77 | %) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.93 | %) | (1.05 | %) | (0.84 | %)(c) | (0.90 | %) | (0.57 | %) | ||||||||||
Net expenses (d) | 2.41 | % | 2.44 | % | 2.44 | % (e) | 2.43 | % | 2.42 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 2.44 | % | 2.44 | % | 2.44 | % (e) | 2.43 | % | 2.42 | % | ||||||||||
Portfolio turnover rate | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 6,960 | $ | 7,564 | $ | 7,850 | $ | 8,292 | $ | 8,383 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been (0.85)%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 2.45%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class I | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 16.48 | $ | 13.59 | $ | 13.59 | $ | 13.19 | $ | 13.45 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.07 | 0.05 | 0.07 | 0.06 | 0.11 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.84 | ) | 2.90 | (0.04 | ) | 0.50 | (0.27 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.78 | ) | 2.96 | 0.04 | 0.53 | (0.20 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.13 | ) | (0.07 | ) | (0.04 | ) | (0.13 | ) | (0.06 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 15.57 | $ | 16.48 | $ | 13.59 | $ | 13.59 | $ | 13.19 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (4.80 | %) | 21.94 | % | 0.29 | % | 4.04 | % | (1.49 | %) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.42 | % | 0.31 | % | 0.54 | %(c) | 0.46 | % | 0.79 | % | ||||||||||
Net expenses (d) | 1.07 | % | 1.09 | % | 1.07 | %(e) | 1.08 | % | 1.09 | % | ||||||||||
Portfolio turnover rate | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 213,030 | $ | 205,009 | $ | 179,274 | $ | 224,307 | $ | 223,797 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.53%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.08%. |
Year ended October 31, | ||||||||||||||||||||
Class R1 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | $ | 13.37 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.05 | 0.03 | 0.06 | 0.04 | 0.09 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.83 | ) | 2.89 | (0.05 | ) | 0.50 | (0.27 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.79 | ) | 2.93 | 0.02 | 0.51 | (0.22 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.11 | ) | (0.06 | ) | (0.02 | ) | (0.11 | ) | (0.04 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 15.48 | $ | 16.38 | $ | 13.51 | $ | 13.51 | $ | 13.11 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (4.86 | %) | 21.78 | % | 0.18 | % | 3.95 | % | (1.63 | %) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.29 | % | 0.21 | % | 0.41 | %(c) | 0.33 | % | 0.66 | % | ||||||||||
Net expenses (d) | 1.17 | % | 1.19 | % | 1.17 | %(e) | 1.18 | % | 1.19 | % | ||||||||||
Portfolio turnover rate | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 2,109 | $ | 2,616 | $ | 2,478 | $ | 3,032 | $ | 3,597 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R1 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.40%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.18%. |
18 | MainStay MacKay International Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class R2 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 16.42 | $ | 13.54 | $ | 13.54 | $ | 13.14 | $ | 13.40 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.02 | ) | 0.01 | 0.01 | 0.01 | 0.05 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.79 | ) | 2.88 | (0.01 | ) | 0.50 | (0.26 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.01 | 0.00 | ‡ | (0.03 | ) | (0.04 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.82 | ) | 2.90 | 0.00 | ‡ | 0.48 | (0.25 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.08 | ) | (0.02 | ) | — | (0.08 | ) | (0.01 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 15.52 | $ | 16.42 | $ | 13.54 | $ | 13.54 | $ | 13.14 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (5.06 | %)(c) | 21.55 | %(c) | (0.07 | %) | 3.73 | % | (1.88 | %) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.13 | %) | 0.06 | % | 0.08 | % | 0.11 | % | 0.36 | % | ||||||||||
Net expenses (d) | 1.42 | % | 1.44 | % | 1.42 | % | 1.43 | % | 1.44 | % | ||||||||||
Portfolio turnover rate | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 602 | $ | 1,201 | $ | 847 | $ | 2,313 | $ | 3,509 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Class R3 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 16.29 | $ | 13.44 | $ | 13.48 | $ | 13.07 | $ | 13.35 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.04 | ) | (0.04 | ) | (0.01 | ) | (0.02 | ) | 0.02 | |||||||||||
Net realized and unrealized gain (loss) on investments | (0.82 | ) | 2.88 | (0.04 | ) | 0.50 | (0.26 | ) | ||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions | (0.01 | ) | 0.01 | 0.01 | (0.03 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | (0.87 | ) | 2.85 | (0.04 | ) | 0.45 | (0.28 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.04 | ) | — | — | (0.04 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 15.38 | $ | 16.29 | $ | 13.44 | $ | 13.48 | $ | 13.07 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | (5.39 | %)(c) | 21.21 | % | (0.30 | %) | 3.44 | % | (2.10 | %) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.21 | %) | (0.27 | %) | (0.11 | %)(d) | (0.15 | %) | 0.17 | % | ||||||||||
Net expenses (e) | 1.67 | % | 1.69 | % | 1.67 | % (f) | 1.68 | % | 1.69 | % | ||||||||||
Portfolio turnover rate | 53 | % | 45 | % | 33 | % | 42 | % | 37 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 1,057 | $ | 1,446 | $ | 1,108 | $ | 1,204 | $ | 1,291 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | Without the custody fee reimbursement, net investment income (loss) would have been (0.12)%. |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(f) | Without the custody fee reimbursement, net expenses would have been 1.68%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay International Equity Fund (formerly known as MainStay International Equity Fund) (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has ten classes of shares registered for sale. Class A shares commenced operations on January 3, 1995. Class B shares commenced operations on September 13, 1994. Class C shares commenced operations on September 1, 1998. Class I, Class R1 and Class R2 shares commenced operations on January 2, 2004. Class R3 shares commenced operations on April 28, 2006. Investor Class shares commenced operations on February 28, 2008. Class R6 and Class T shares of the Fund were registered for sale effective as of February 28, 2017. As of October 31, 2018, Class R6 and Class T shares were not yet offered for sale. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made
within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I, Class R1, Class R2 and Class R3 shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T, Class R2 and Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee. Class R1, Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seek long-term growth of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the
20 | MainStay MacKay International Equity Fund |
“Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Broker/dealer quotes | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • Reported trades |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Certain securities held by the Fund may principally trade in foreign markets. Events may occur between the time the foreign markets close and the time at which the Fund’s NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer
21 |
Notes to Financial Statements (continued)
in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or the Subadvisor conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee may, pursuant to procedures adopted by the Board, adjust the value of the local price to reflect the estimated impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, certain foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third-party vendor in accordance with valuation procedures adopted by the Board and are generally categorized as Level 2 in the hierarchy. As of October 31, 2018, no foreign equity securities held by the Fund were fair valued in such a manner.
Equity securities, including shares of exchange-traded funds (“ETFs”), are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
A portfolio security or other asset may be determined to be illiquid under procedures approved by the Board. Illiquidity of a security might prevent the sale of such security at a time when the Manager or the Subadvisor might wish to sell, and these securities could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value
illiquid securities, requiring the Fund to rely on judgments that may be somewhat subjective in measuring value, which could vary materially from the amount that the Fund could realize upon disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Board, the Manager or the Subadvisor determine the liquidity of the Fund’s investments; in doing so, the Manager or the Subadvisor may consider various factors, including (i) the frequency of trades and quotations; (ii) the number of dealers and prospective purchasers; (iii) dealer undertakings to make a market; and (iv) the nature of the security and the market in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Illiquid securities are often valued in accordance with methods deemed by the Board in good faith to be reasonable and appropriate to accurately reflect their fair value. The liquidity of the Fund’s investments, as shown in the Portfolio of Investments, was determined as of October 31, 2018 and can change at any time in response to, among other relevant factors, market conditions or events or developments with respect to an individual issuer or instrument. As of October 31, 2018, the Fund did not hold any securities deemed to be illiquid under procedures approved by the Board.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be reclaimable. The Fund will accrue such taxes and reclaims as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
The Fund may be subject to taxation on realized capital gains, repatriation proceeds and other transaction-based taxes imposed by certain countries in which it invests. The Fund will accrue such taxes as applicable based upon its current interpretation of tax rules and regulations that exist in the market in which it invests. Capital gains taxes relating to positions still held are reflected as a liability on the Statement of Assets and Liabilities, as well as an adjustment to the Fund’s net unrealized
22 | MainStay MacKay International Equity Fund |
appreciation (depreciation). Taxes related to capital gains realized, if any, are reflected as part of net realized gain (loss) in the Statement of Operations. Changes in tax liabilities related to capital gains taxes on unrealized investment gains, if any, are reflected as part of the change in net unrealized appreciation (depreciation) on investments in the Statement of Operations. Transaction-based charges are generally assessed as a percentage of the transaction amount.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in ETFs and mutual funds, which are subject to management fees and other fees that may increase the costs of investing in ETFs and mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of ETFs and mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the
Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of October 31, 2018, the Fund did not hold any repurchase agreements.
(I) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activity, if any, is reflected in the Statement of Operations. As of October 31, 2018, the Fund had securities on loan with a value of $7,033,733 and had received non-cash collateral in the form of U.S. Treasury securities with a value of $7,455,236.
(J) Foreign Currency Transactions. The Fund’s books and records are maintained in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities—at the valuation date; and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
23 |
Notes to Financial Statements (continued)
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
(K) Foreign Securities Risk. The Fund invests in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. These risks include those resulting from currency fluctuations, future adverse political or economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
(L) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. The Fund’s subadvisor changed effective January 1, 2018 due to an organizational restructuring whereby all investment personnel of Cornerstone Capital Management Holdings LLC, the former subadvisor, transitioned to MacKay Shields LLC
(“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life. MacKay Shields serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.89% up to $500 million; and 0.85% in excess of $500 million. During the year ended October 31, 2018, the effective management fee rate (exclusive of any applicable waivers/reimbursements) was 0.89%.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019 and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval by the Board. New York Life Investments has voluntarily agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments and acquired (underlying) fund fees and expenses) of a class do not exceed the following percentages of average daily net assets: Investor Class, 1.85%; Class B, 2.60%; and Class C, 2.60%. These voluntary waivers or reimbursements may be discontinued at any time without notice.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $2,964,590 and voluntarily waived and/or reimbursed certain class specific expenses in the amount of $15,314.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
24 | MainStay MacKay International Equity Fund |
Pursuant to the Class A, Investor Class, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor
Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R1, Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R1, Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the year ended October 31, 2018, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 2,487 | ||
Class R2 | 878 | |||
Class R3 | 1,311 |
(C) Sales Charges. During the year ended October 31, 2018, the Fund was advised by the Distributor that the amount of initial sales
charges retained on sales of Class A and Investor Class shares were $20,710 and $11,675, respectively.
During the year ended October 31, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class shares, Class B and Class C shares of $1,844, $4, $3,588 and $1,004, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 39,428 | ||
Investor Class | 110,409 | |||
Class B | 24,653 | |||
Class C | 35,641 | |||
Class I | 143,564 | |||
Class R1 | 1,573 | |||
Class R2 | 558 | |||
Class R3 | 830 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the year ended October 31, 2018, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Companies | Value, Beginning of Year | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Year | Dividend Income | Other Distributions | Shares End of Year | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | — | $ | 13,133 | $ | (12,518 | ) | $ | — | $ | — | $ | 615 | $ | 4 | $ | — | 615 |
(G) Capital. As of October 31, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class I | $ | 85,839,678 | 40.3 | % |
Note 4–Federal Income Tax
As of October 31, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable
derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 294,290,416 | $ | 22,862,248 | $ | (23,665,120 | ) | $ | (802,872 | ) |
25 |
Notes to Financial Statements (continued)
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary Income | Accumulated Other Gain (Loss) | Other Temporary Differences | Unrealized Appreciation (Depreciation) | Total Gain (Loss) | ||||
$119,677 | $3,076,892 | $(24,973) | $(1,022,683) | $2,148,913 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily due to wash sale adjustments and Passive Foreign Investment Company (PFIC) adjustments. The other temporary differences are primarily due to foreign taxes payable.
The Fund utilized $35,592,840 of capital loss carryforwards during the year ended October 31, 2018.
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 1,998,004 | $ | 1,059,843 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to July 31, 2018, the aggregate commitment amount and the commitment fee were the same as those under the current Credit Agreement. During the year ended October 31, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the year ended October 31, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2018, purchases and sales of securities, other than short-term securities, were $181,574 and $168,230, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 915,766 | $ | 15,804,049 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 17,877 | 301,222 | ||||||
Shares redeemed | (652,088 | ) | (11,185,225 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 281,555 | 4,920,046 | ||||||
Shares converted into Class A (See Note 1) | 235,657 | 4,058,475 | ||||||
Shares converted from Class A (See Note 1) | (16,148 | ) | (277,043 | ) | ||||
|
| |||||||
Net increase (decrease) | 501,064 | $ | 8,701,478 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 345,562 | $ | 5,153,486 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 8,386 | 106,672 | ||||||
Shares redeemed | (877,615 | ) | (12,554,676 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (523,667 | ) | (7,294,518 | ) | ||||
Shares converted into Class A (See Note 1) | 787,104 | 12,465,344 | ||||||
Shares converted from Class A (See Note 1) | (33,750 | ) | (483,068 | ) | ||||
|
| |||||||
Net increase (decrease) | 229,687 | $ | 4,687,758 | |||||
|
| |||||||
26 | MainStay MacKay International Equity Fund |
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 181,940 | $ | 3,114,134 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,537 | 42,599 | ||||||
Shares redeemed | (142,385 | ) | (2,425,059 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 42,092 | 731,674 | ||||||
Shares converted into Investor Class (See Note 1) | 51,656 | 881,872 | ||||||
Shares converted from Investor Class (See Note 1) | (222,310 | ) | (3,809,182 | ) | ||||
|
| |||||||
Net increase (decrease) | (128,562 | ) | $ | (2,195,636 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 173,615 | $ | 2,541,116 | |||||
Shares redeemed | (274,294 | ) | (3,908,999 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (100,679 | ) | (1,367,883 | ) | ||||
Shares converted into Investor Class (See Note 1) | 77,754 | 1,116,985 | ||||||
Shares converted from Investor Class (See Note 1) | (786,293 | ) | (12,378,871 | ) | ||||
|
| |||||||
Net increase (decrease) | (809,218 | ) | $ | (12,629,769 | ) | |||
|
| |||||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 19,666 | $ | 295,697 | |||||
Shares redeemed | (67,685 | ) | (1,025,420 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (48,019 | ) | (729,723 | ) | ||||
Shares converted from Class B (See Note 1) | (56,653 | ) | (865,791 | ) | ||||
|
| |||||||
Net increase (decrease) | (104,672 | ) | $ | (1,595,514 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 38,477 | $ | 482,874 | |||||
Shares redeemed | (115,580 | ) | (1,470,403 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (77,103 | ) | (987,529 | ) | ||||
Shares converted from Class B (See Note 1) | (73,733 | ) | (945,459 | ) | ||||
|
| |||||||
Net increase (decrease) | (150,836 | ) | $ | (1,932,988 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 106,648 | $ | 1,618,061 | |||||
Shares redeemed | (117,432 | ) | (1,776,629 | ) | ||||
|
| |||||||
Net increase (decrease) | (10,784 | ) | $ | (158,568 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 100,333 | $ | 1,293,338 | |||||
Shares redeemed | (229,189 | ) | (2,877,871 | ) | ||||
|
| |||||||
Net increase (decrease) | (128,856 | ) | $ | (1,584,533 | ) | |||
|
| |||||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,653,814 | $ | 62,248,511 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 95,420 | 1,614,501 | ||||||
Shares redeemed | (2,512,532 | ) | (43,353,547 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 1,236,702 | 20,509,465 | ||||||
Shares converted into Class I (See Note 1) | 653 | 11,669 | ||||||
|
| |||||||
Net increase (decrease) | 1,237,355 | $ | 20,521,134 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,946,659 | $ | 27,785,220 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 73,427 | 936,926 | ||||||
Shares redeemed | (2,782,401 | ) | (40,635,078 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (762,315 | ) | (11,912,932 | ) | ||||
Shares converted into Class I (See Note 1) | 16,255 | 225,069 | ||||||
|
|
|
| |||||
Net increase (decrease) | (746,060 | ) | $ | (11,687,863 | ) | |||
|
|
|
| |||||
Class R1 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 12,744 | $ | 221,403 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,061 | 17,860 | ||||||
Shares redeemed | (37,224 | ) | (638,649 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (23,419 | ) | $ | (399,386 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 8,744 | $ | 131,452 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 787 | 10,000 | ||||||
Shares redeemed | (33,216 | ) | (486,548 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (23,685 | ) | $ | (345,096 | ) | |||
|
|
|
| |||||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 24,226 | $ | 421,614 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 102 | 1,720 | ||||||
Shares redeemed | (58,640 | ) | (988,905 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (34,312 | ) | $ | (565,571 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 56,641 | $ | 797,268 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 57 | 731 | ||||||
Shares redeemed | (46,136 | ) | (680,328 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 10,562 | $ | 117,671 | |||||
|
|
|
| |||||
27 |
Notes to Financial Statements (continued)
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 24,025 | $ | 415,163 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 176 | 2,956 | ||||||
Shares redeemed | (44,289 | ) | (747,589 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (20,088 | ) | $ | (329,470 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 34,475 | $ | 485,555 | |||||
Shares redeemed | (28,104 | ) | (410,533 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 6,371 | $ | 75,022 | |||||
|
|
|
|
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
28 | MainStay MacKay International Equity Fund |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The MainStay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MainStay MacKay International Equity Fund (formerly MainStay International Equity Fund) (the Fund), one of the funds constituting The MainStay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians, the transfer agent, and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
29 |
Federal Income Tax Information
(Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders in a written statement as to the federal tax status of dividends paid by the Fund during such fiscal years.
For the fiscal year ended October 31, 2018, the Fund designated approximately $2,664,317 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
In accordance with federal tax law, the Fund elected to provide each shareholder with their portion of the Fund’s foreign taxes paid and the income sourced from foreign countries. Accordingly, the Fund made the following designations regarding its fiscal year ended October 31, 2018:
• | the total amount of taxes credited to foreign countries was $666,313. |
• | the total amount of income sourced from foreign countries was $5,035,941. |
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
30 | MainStay MacKay International Equity Fund |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
31 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
32 | MainStay MacKay International Equity Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
33 |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
* | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
34 | MainStay MacKay International Equity Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1715994 MS293-18 | MSIE11-12/18 (NYLIM) NL213 |
MainStay MacKay Common Stock Fund (Formerly known as MainStay Common Stock Fund)
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class B shares2 of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception Date | One Year | Five Years or Since Inception | Ten Years | Gross Expense Ratio3 | ||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | 6/1/1998 | | | 2.13 8.07 | %
| | 9.55 10.80 | %
| | 11.64 12.27 | %
| | 0.97 0.97 | %
| |||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | 1.89 7.82 |
| | 9.28 10.52 |
| | 11.20 11.83 |
| | 1.23 1.23 |
| |||||||
Class B Shares2 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 6/1/1998 | | | 2.03 7.03 |
| | 9.42 9.70 |
| | 11.00 11.00 |
| | 1.98 1.98 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 9/1/1998 | | | 5.99 6.99 |
| | 9.69 9.69 |
| | 11.00 11.00 |
| | 1.98 1.98 |
| |||||||
Class I Shares | No Sales Charge | 12/28/2004 | 8.36 | 11.08 | 12.56 | 0.72 | ||||||||||||||||||
Class R3 Shares | No Sales Charge | 2/29/2016 | 7.66 | 14.70 | N/A | 1.32 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
3. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
S&P 500® Index4 | 7.35% | 11.34 | % | 13.24 | % | |||||||
Russell 1000® Index5 | 6.98 | 11.05 | 13.42 | |||||||||
Morningstar Large Blend Category Average6 | 5.28 | 9.44 | 12.14 |
4. | The S&P 500® Index is the Fund’s primary broad-based securities market index for comparison purposes. “S&P 500®” is a trademark of the McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The Russell 1000® Index is the Fund’s secondary benchmark. The Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. Results assume |
reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Large Blend Category Average is representative of funds that represent the overall US stock market in size, growth rates and price. Stocks in the top 70% of the capitalization of the US equity market are defined as large cap. The blend style is assigned to portfolios where neither growth nor value characteristics predominate. These portfolios tend to invest across the spectrum of US industries, and owing to their broad exposure, the portfolios’ returns are often similar to those of the S&P 500 Index. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MacKay Common Stock Fund |
Cost in Dollars of a $1,000 Investment in MainStay MacKay Common Stock Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 10/31/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,033.40 | $ | 5.02 | $ | 1,020.27 | $ | 4.99 | 0.98% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,032.20 | $ | 6.25 | $ | 1,019.06 | $ | 6.21 | 1.22% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,028.20 | $ | 10.07 | $ | 1,015.28 | $ | 10.01 | 1.97% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,028.30 | $ | 10.07 | $ | 1,015.28 | $ | 10.01 | 1.97% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,034.80 | $ | 3.74 | $ | 1,021.53 | $ | 3.72 | 0.73% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,031.50 | $ | 6.81 | $ | 1,018.50 | $ | 6.77 | 1.33% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Industry Composition as of October 31, 2018 (Unaudited)
Oil, Gas & Consumable Fuels | 7.7 | % | ||
Banks | 6.3 | |||
Health Care Providers & Services | 6.3 | |||
Software | 6.2 | |||
IT Services | 6.0 | |||
Technology Hardware, Storage & Peripherals | 5.7 | |||
Interactive Media & Services | 5.4 | |||
Internet & Direct Marketing Retail | 3.9 | |||
Pharmaceuticals | 3.9 | |||
Semiconductors & Semiconductor Equipment | 3.9 | |||
Insurance | 3.3 | |||
Food & Staples Retailing | 3.1 | |||
Specialty Retail | 2.9 | |||
Multiline Retail | 2.8 | |||
Biotechnology | 2.4 | |||
Diversified Financial Services | 2.4 | |||
Entertainment | 2.3 | |||
Aerospace & Defense | 2.1 | |||
Chemicals | 1.8 | |||
Exchange-Traded Funds | 1.8 | |||
Media | 1.7 | |||
Equity Real Estate Investment Trusts | 1.6 | |||
Diversified Telecommunication Services | 1.5 | |||
Independent Power & Renewable Electricity Producers | 1.4 | |||
Textiles, Apparel & Luxury Goods | 1.3 | |||
Health Care Equipment & Supplies | 1.2 | |||
Hotels, Restaurants & Leisure | 1.1 |
Beverages | 1.0 | % | ||
Commercial Services & Supplies | 1.0 | |||
Machinery | 1.0 | |||
Capital Markets | 0.9 | |||
Communications Equipment | 0.9 | |||
Household Products | 0.8 | |||
Airlines | 0.7 | |||
Diversified Consumer Services | 0.7 | |||
Trading Companies & Distributors | 0.7 | |||
Electric Utilities | 0.5 | |||
Consumer Finance | 0.3 | |||
Electrical Equipment | 0.3 | |||
Electronic Equipment, Instruments & Components | 0.3 | |||
Industrial Conglomerates | 0.3 | |||
Life Sciences Tools & Services | 0.2 | |||
Professional Services | 0.2 | |||
Food Products | 0.1 | |||
Tobacco | 0.1 | |||
Auto Components | 0.0 | ‡ | ||
Building Products | 0.0 | ‡ | ||
Energy Equipment & Services | 0.0 | ‡ | ||
Road & Rail | 0.0 | ‡ | ||
Short-Term Investment | 0.0 | ‡ | ||
Other Assets, Less Liabilities | –0.0 | ‡ | ||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 10 for specific holdings within these categories. The Fund’s portfolio is subject to change.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings as of October 31, 2018 (excluding short-term investment) (Unaudited)
1. | Apple, Inc. |
2. | Microsoft Corp. |
3. | Alphabet, Inc. |
4. | Amazon.com, Inc. |
5. | Berkshire Hathaway, Inc., Class B |
6. | JPMorgan Chase & Co. |
7. | Exxon Mobil Corp. |
8. | Facebook, Inc., Class A |
9. | Johnson & Johnson |
10. | SPDR S&P 500 ETF Trust |
8 | MainStay MacKay Common Stock Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by Migene Kim, CFA, Andrew Ver Planck, CFA,1 and Mona Patni of MacKay Shields LLC, the Fund’s Subadvisor.
How did MainStay MacKay Common Stock Fund perform relative to its benchmarks and peer group during the 12 months ended October 31, 2018?
For the 12 months ended October 31, 2018, Class I shares of MainStay MacKay Common Stock Fund returned 8.36%, outperforming the 7.35% return of the Fund’s primary benchmark, the S&P 500® Index, and the 6.98% return of the Fund’s secondary benchmark, the Russell 1000® Index. Over the same period, Class I shares also outperformed the 5.28% return of the Morningstar Large Blend Category Average.2
What factors affected the Fund’s relative performance during the reporting period?
The Fund outperformed its primary benchmark, the S&P 500® Index, during the reporting period primarily because of effective stock selection in the energy and health care sectors. Allocation effects also contributed positively to the Fund’s relative performance. (Contributions take weightings and total returns into account.) The prospect of pro-business tax cuts and the easing of regulations, as well as solid corporate results, robust consumer spending and healthy labor market conditions helped drive Fund performance during the reporting period. During the reporting period, the market experienced a bumpy ride, punctuated with heightened volatility and sharp market swings. Notably, however, domestic large-cap equities outperformed domestic small-cap equities during the reporting period.
Were there any changes to the Fund during the reporting period?
Effective January 1, 2018, MacKay Shields assumed subadvisory responsibilities for the Fund and the portfolio managers from Cornerstone Capital Management Holdings LLC transitioned to MacKay Shields. Effective February 28, 2018, the Fund was renamed MainStay MacKay Common Stock Fund. For more information on these changes, please refer to the supplements dated September 28, 2017, and December 15, 2017.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
During the reporting period, the strongest positive contributors to the Fund’s performance relative to the S&P 500® Index were the energy, health care and industrials sectors. During the same period, the weakest contributors to relative performance were the information technology, communication services and financials sectors.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
The individual stocks that made the strongest positive contributions to the Fund’s absolute performance during the reporting period were consumer electronic retailer Apple, software bellwether Microsoft and e-commerce behemoth Amazon. The stocks that detracted the most from the Fund’s absolute performance were social networking site Facebook, e-commerce retailer eBay and IT service provider International Business Machines (IBM). The Fund’s positions in Facebook, eBay and IBM all remain as of the end of the reporting period.
What were some of the Fund’s largest purchases and sales during the reporting period?
Over the reporting period, the Fund’s largest initial purchase was in oil & gas exploration and production company ConocoPhillips. The Fund initiated a purchase in ConocoPhillips in November 2017, maintaining an overweight position through the remainder of the reporting period as, in our opinion, the stock remained attractive in terms of valuation while sentiment and price trend improved. The Fund also accumulated more shares of diversified global bank, Bank of America, primarily based on valuation.
The Fund sold its position in tobacco manufacturer Philip Morris International and construction and mining equipment manufacturer Caterpillar during the reporting period. In our view, the return prospect of Philip Morris declined in terms of momentum and sentiment, as the smokeless shipment growth disappointed. Both price trend and valuation readings declined for Caterpillar, causing the Fund to sell out of all the shares by May 2018.
How did the Fund’s sector weightings change during the reporting period?
The Fund’s largest increases in sector exposures relative to the S&P 500® Index were in the communication services and financials sectors. Conversely, the Fund’s largest decreases in benchmark-relative sector exposures were in the consumer staples and materials sectors.
How was the Fund positioned at the end of the reporting period?
The Fund ended the reporting period most overweight relative to the S&P 500® Index, in the consumer discretionary and information technology sectors. The Fund was most underweight, relative to the benchmark, in the industrials and consumer staples sectors.
1. | Effective December 18, 2018, Andrew Ver Planck no longer serves as a portfolio manager of the Fund. |
2. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
9 |
Portfolio of Investments October 31, 2018
Shares | Value | |||||||
Common Stocks 98.2%† | ||||||||
Aerospace & Defense 2.1% | ||||||||
Boeing Co. | 8,409 | $ | 2,984,018 | |||||
Huntington Ingalls Industries, Inc. | 3,119 | 681,439 | ||||||
Lockheed Martin Corp. | 119 | 34,968 | ||||||
Northrop Grumman Corp. | 107 | 28,028 | ||||||
Raytheon Co. | 3,025 | 529,496 | ||||||
Textron, Inc. | 182 | 9,761 | ||||||
|
| |||||||
4,267,710 | ||||||||
|
| |||||||
Airlines 0.7% | ||||||||
United Continental Holdings, Inc. (a) | 17,026 | 1,455,893 | ||||||
|
| |||||||
Auto Components 0.0%‡ | ||||||||
Garrett Motion, Inc. (a) | 250 | 3,792 | ||||||
|
| |||||||
Banks 6.3% | ||||||||
Bank of America Corp. | 120,239 | 3,306,573 | ||||||
Citigroup, Inc. | 41,168 | 2,694,857 | ||||||
Fifth Third Bancorp | 23,294 | 628,705 | ||||||
JPMorgan Chase & Co. | 40,921 | 4,461,207 | ||||||
Wells Fargo & Co. | 27,698 | 1,474,365 | ||||||
|
| |||||||
12,565,707 | ||||||||
|
| |||||||
Beverages 1.0% | ||||||||
Coca-Cola Co. | 4,127 | 197,601 | ||||||
PepsiCo., Inc. | 16,553 | 1,860,226 | ||||||
|
| |||||||
2,057,827 | ||||||||
|
| |||||||
Biotechnology 2.4% | ||||||||
AbbVie, Inc. | 10,128 | 788,465 | ||||||
Amgen, Inc. | 6,378 | 1,229,614 | ||||||
Biogen, Inc. (a) | 2,650 | 806,315 | ||||||
Celgene Corp. (a) | 788 | 56,421 | ||||||
Gilead Sciences, Inc. | 20,037 | 1,366,123 | ||||||
United Therapeutics Corp. (a) | 5,352 | 593,323 | ||||||
|
| |||||||
4,840,261 | ||||||||
|
| |||||||
Building Products 0.0%‡ | ||||||||
Resideo Technologies, Inc. (a) | 754 | 15,875 | ||||||
|
| |||||||
Capital Markets 0.9% | ||||||||
Ameriprise Financial, Inc. | 4,575 | 582,123 | ||||||
E*TRADE Financial Corp. | 15,082 | 745,352 | ||||||
Evercore, Inc., Class A | 6,243 | 509,991 | ||||||
|
| |||||||
1,837,466 | ||||||||
|
| |||||||
Chemicals 1.8% | ||||||||
CF Industries Holdings, Inc. | 28,621 | 1,374,667 | ||||||
DowDuPont, Inc. | 197 | 10,622 | ||||||
LyondellBasell Industries N.V., Class A | 11,581 | 1,033,836 | ||||||
Mosaic Co. | 37,849 | 1,171,048 | ||||||
|
| |||||||
3,590,173 | ||||||||
|
|
Shares | Value | |||||||
Commercial Services & Supplies 1.0% | ||||||||
Republic Services, Inc. | 13,771 | $ | 1,000,876 | |||||
Waste Management, Inc. | 11,003 | 984,439 | ||||||
|
| |||||||
1,985,315 | ||||||||
|
| |||||||
Communications Equipment 0.9% | ||||||||
Arista Networks, Inc. (a) | 423 | 97,438 | ||||||
Ciena Corp. (a) | 5,926 | 185,247 | ||||||
Cisco Systems, Inc. | 17,496 | 800,442 | ||||||
Juniper Networks, Inc. | 24,171 | 707,485 | ||||||
|
| |||||||
1,790,612 | ||||||||
|
| |||||||
Consumer Finance 0.3% | ||||||||
Synchrony Financial | 22,697 | 655,489 | ||||||
|
| |||||||
Diversified Consumer Services 0.7% | ||||||||
H&R Block, Inc. | 52,623 | 1,396,614 | ||||||
|
| |||||||
Diversified Financial Services 2.4% | ||||||||
Berkshire Hathaway, Inc., Class B (a) | 22,850 | 4,690,648 | ||||||
|
| |||||||
Diversified Telecommunication Services 1.5% |
| |||||||
AT&T, Inc. | 40,321 | 1,237,048 | ||||||
CenturyLink, Inc. | 8,306 | 171,436 | ||||||
Verizon Communications, Inc. | 27,722 | 1,582,649 | ||||||
|
| |||||||
2,991,133 | ||||||||
|
| |||||||
Electric Utilities 0.5% | ||||||||
Exelon Corp. | 4,289 | 187,901 | ||||||
PG&E Corp. (a) | 16,625 | 778,216 | ||||||
|
| |||||||
966,117 | ||||||||
|
| |||||||
Electrical Equipment 0.3% | ||||||||
Acuity Brands, Inc. | 5,220 | 655,841 | ||||||
|
| |||||||
Electronic Equipment, Instruments & Components 0.3% |
| |||||||
Jabil, Inc. | 19,772 | 488,962 | ||||||
|
| |||||||
Energy Equipment & Services 0.0%‡ | ||||||||
Halliburton Co. | 488 | 16,924 | ||||||
|
| |||||||
Entertainment 2.3% | ||||||||
Cinemark Holdings, Inc. | 16,403 | 681,873 | ||||||
Netflix, Inc. (a) | 3,713 | 1,120,509 | ||||||
Twenty-First Century Fox, Inc. | ||||||||
Class A | 829 | 37,736 | ||||||
Class B | 23 | 1,039 | ||||||
Viacom, Inc., Class B | 45,970 | 1,470,121 | ||||||
Walt Disney Co. | 10,544 | 1,210,767 | ||||||
|
| |||||||
4,522,045 | ||||||||
|
|
10 | MainStay MacKay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Equity Real Estate Investment Trusts 1.6% |
| |||||||
Host Hotels & Resorts, Inc. | 64,358 | $ | 1,229,881 | |||||
Omega Healthcare Investors, Inc. | 13,263 | 442,321 | ||||||
Public Storage | 6,995 | 1,437,263 | ||||||
Senior Housing Properties Trust | 2,944 | 47,310 | ||||||
Simon Property Group, Inc. | 295 | 54,139 | ||||||
|
| |||||||
3,210,914 | ||||||||
|
| |||||||
Food & Staples Retailing 3.1% | ||||||||
Costco Wholesale Corp. | 6,400 | 1,463,232 | ||||||
Kroger Co. | 40,352 | 1,200,875 | ||||||
Walgreens Boots Alliance, Inc. | 12,545 | 1,000,715 | ||||||
Walmart, Inc. | 25,870 | 2,594,244 | ||||||
|
| |||||||
6,259,066 | ||||||||
|
| |||||||
Food Products 0.1% | ||||||||
Tyson Foods, Inc., Class A | 3,974 | 238,122 | ||||||
|
| |||||||
Health Care Equipment & Supplies 1.2% | ||||||||
Abbott Laboratories | 14,400 | 992,736 | ||||||
ABIOMED, Inc. (a) | 371 | 126,585 | ||||||
Intuitive Surgical, Inc. (a) | 966 | 503,460 | ||||||
Varian Medical Systems, Inc. (a) | 6,276 | 749,166 | ||||||
|
| |||||||
2,371,947 | ||||||||
|
| |||||||
Health Care Providers & Services 6.3% | ||||||||
AmerisourceBergen Corp. | 2,276 | 200,288 | ||||||
Centene Corp. (a) | 10,568 | 1,377,222 | ||||||
Cigna Corp. | 8,769 | 1,874,900 | ||||||
CVS Health Corp. | 936 | 67,757 | ||||||
Encompass Health Corp. | 10,729 | 722,062 | ||||||
HCA Healthcare, Inc. | 12,391 | 1,654,570 | ||||||
Humana, Inc. | 5,179 | 1,659,403 | ||||||
Molina Healthcare, Inc. (a) | 9,492 | 1,203,301 | ||||||
UnitedHealth Group, Inc. | 10,044 | 2,624,999 | ||||||
WellCare Health Plans, Inc. (a) | 4,520 | 1,247,475 | ||||||
|
| |||||||
12,631,977 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure 1.1% | ||||||||
Chipotle Mexican Grill, Inc. (a) | 1,034 | 475,981 | ||||||
Darden Restaurants, Inc. | 12,752 | 1,358,726 | ||||||
Starbucks Corp. | 2,112 | 123,066 | ||||||
Texas Roadhouse, Inc. | 5,041 | 304,779 | ||||||
|
| |||||||
2,262,552 | ||||||||
|
| |||||||
Household Products 0.8% | ||||||||
Procter & Gamble Co. | 18,714 | 1,659,558 | ||||||
|
| |||||||
Independent Power & Renewable Electricity Producers 1.4% |
| |||||||
AES Corp. | 100,159 | 1,460,318 | ||||||
NRG Energy, Inc. | 39,403 | 1,425,995 | ||||||
|
| |||||||
2,886,313 | ||||||||
|
|
Shares | Value | |||||||
Industrial Conglomerates 0.3% | ||||||||
Honeywell International, Inc. | 4,525 | $ | 655,310 | |||||
|
| |||||||
Insurance 3.3% | ||||||||
Aflac, Inc. | 16,915 | 728,529 | ||||||
Allstate Corp. | 13,050 | 1,249,146 | ||||||
First American Financial Corp. | 8,822 | 391,080 | ||||||
MetLife, Inc. | 13,575 | 559,154 | ||||||
Progressive Corp. | 24,173 | 1,684,858 | ||||||
Prudential Financial, Inc. | 9,468 | 887,909 | ||||||
Travelers Cos., Inc. | 4,532 | 567,089 | ||||||
Unum Group | 12,972 | 470,365 | ||||||
|
| |||||||
6,538,130 | ||||||||
|
| |||||||
Interactive Media & Services 5.4% | ||||||||
Alphabet, Inc. (a) | ||||||||
Class A | 3,138 | 3,422,240 | ||||||
Class C | 3,174 | 3,417,668 | ||||||
Facebook, Inc., Class A (a) | 25,818 | 3,918,914 | ||||||
|
| |||||||
10,758,822 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail 3.9% | ||||||||
Amazon.com, Inc. (a) | 3,469 | 5,543,497 | ||||||
Booking Holdings, Inc. (a) | 110 | 206,204 | ||||||
eBay, Inc. (a) | 22,602 | 656,136 | ||||||
Expedia Group, Inc. | 11,743 | 1,472,924 | ||||||
|
| |||||||
7,878,761 | ||||||||
|
| |||||||
IT Services 6.0% | ||||||||
Accenture PLC, Class A | 9,092 | 1,433,081 | ||||||
Akamai Technologies, Inc. (a) | 8,932 | 645,337 | ||||||
Alliance Data Systems Corp. | 1,217 | 250,921 | ||||||
DXC Technology Co. | 2,411 | 175,593 | ||||||
International Business Machines Corp. | 15,896 | 1,834,875 | ||||||
Leidos Holdings, Inc. | 120 | 7,774 | ||||||
Mastercard, Inc., Class A | 7,807 | 1,543,210 | ||||||
MAXIMUS, Inc. | 11,501 | 747,220 | ||||||
PayPal Holdings, Inc. (a) | 9,832 | 827,756 | ||||||
Sabre Corp. | 52,544 | 1,295,210 | ||||||
Teradata Corp. (a) | 1,141 | 41,532 | ||||||
Visa, Inc., Class A | 16,009 | 2,206,841 | ||||||
Western Union Co. | 50,853 | 917,388 | ||||||
|
| |||||||
11,926,738 | ||||||||
|
| |||||||
Life Sciences Tools & Services 0.2% | ||||||||
Illumina, Inc. (a) | 1,253 | 389,871 | ||||||
|
| |||||||
Machinery 1.0% | ||||||||
Cummins, Inc. | 5,961 | 814,809 | ||||||
PACCAR, Inc. | 663 | 37,930 | ||||||
Trinity Industries, Inc. | 36,829 | 1,051,468 | ||||||
|
| |||||||
1,904,207 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Portfolio of Investments October 31, 2018 (continued)
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Media 1.7% | ||||||||
Comcast Corp., Class A | 58,416 | $ | 2,227,986 | |||||
Discovery, Inc. (a) | ||||||||
Class A | 17,214 | 557,562 | ||||||
Class C | 11,561 | 338,853 | ||||||
Omnicom Group, Inc. | 2,978 | 221,325 | ||||||
|
| |||||||
3,345,726 | ||||||||
|
| |||||||
Multiline Retail 2.8% |
| |||||||
Kohl’s Corp. | 15,167 | 1,148,597 | ||||||
Macy’s, Inc. | 41,076 | 1,408,496 | ||||||
Nordstrom, Inc. | 22,039 | 1,449,505 | ||||||
Target Corp. | 18,787 | 1,571,157 | ||||||
|
| |||||||
5,577,755 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels 7.7% |
| |||||||
Chevron Corp. | 26,855 | 2,998,361 | ||||||
ConocoPhillips | 28,730 | 2,008,227 | ||||||
Exxon Mobil Corp. | 51,127 | 4,073,799 | ||||||
HollyFrontier Corp. | 20,903 | 1,409,698 | ||||||
Marathon Petroleum Corp. | 15,841 | 1,115,999 | ||||||
Murphy Oil Corp. | 41,515 | 1,322,668 | ||||||
PBF Energy, Inc., Class A | 27,957 | 1,170,001 | ||||||
Valero Energy Corp. | 13,960 | 1,271,616 | ||||||
|
| |||||||
15,370,369 | ||||||||
|
| |||||||
Pharmaceuticals 3.9% |
| |||||||
Allergan PLC | 7,525 | 1,189,025 | ||||||
Bristol-Myers Squibb Co. | 10,352 | 523,190 | ||||||
Eli Lilly & Co. | 617 | 66,907 | ||||||
Johnson & Johnson | 26,613 | 3,725,554 | ||||||
Merck & Co., Inc. | 4,141 | 304,819 | ||||||
Mylan N.V. (a) | 3,447 | 107,719 | ||||||
Pfizer, Inc. | 44,162 | 1,901,616 | ||||||
|
| |||||||
7,818,830 | ||||||||
|
| |||||||
Professional Services 0.2% |
| |||||||
Robert Half International, Inc. | 7,515 | 454,883 | ||||||
|
| |||||||
Road & Rail 0.0%‡ | ||||||||
Genesee & Wyoming, Inc., Class A (a) | 582 | 46,112 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 3.9% |
| |||||||
Broadcom, Inc. | 704 | 157,337 | ||||||
Intel Corp. | 69,071 | 3,238,049 | ||||||
KLA-Tencor Corp. | 4,067 | 372,293 | ||||||
Micron Technology, Inc. (a) | 42,145 | 1,589,709 | ||||||
NVIDIA Corp. | 5,184 | 1,092,943 | ||||||
Qorvo, Inc. (a) | 19,189 | 1,410,583 | ||||||
|
| |||||||
7,860,914 | ||||||||
|
|
Shares | Value | |||||||
Software 6.2% |
| |||||||
Adobe, Inc. (a) | 1,643 | $ | 403,784 | |||||
Citrix Systems, Inc. (a) | 12,931 | 1,325,039 | ||||||
LogMeIn, Inc. | 1,081 | 93,096 | ||||||
Microsoft Corp. | 65,406 | 6,986,015 | ||||||
Oracle Corp. | 51,158 | 2,498,557 | ||||||
salesforce.com, Inc. (a) | 6,248 | 857,475 | ||||||
Symantec Corp. | 7,732 | 140,336 | ||||||
|
| |||||||
12,304,302 | ||||||||
|
| |||||||
Specialty Retail 2.9% |
| |||||||
Advance Auto Parts, Inc. | 4,000 | 639,040 | ||||||
American Eagle Outfitters, Inc. | 7,797 | 179,799 | ||||||
Best Buy Co., Inc. | 19,807 | 1,389,659 | ||||||
Foot Locker, Inc. | 14,825 | 698,850 | ||||||
Gap, Inc. | 29,516 | 805,787 | ||||||
Home Depot, Inc. | 3,011 | 529,575 | ||||||
Tractor Supply Co. | 2,399 | 220,444 | ||||||
Ulta Beauty, Inc. (a) | 104 | 28,550 | ||||||
Williams-Sonoma, Inc. | 20,942 | 1,243,536 | ||||||
|
| |||||||
5,735,240 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals 5.7% |
| |||||||
Apple, Inc. | 45,015 | 9,851,983 | ||||||
HP, Inc. | 8,536 | 206,059 | ||||||
NetApp, Inc. | 9,903 | 777,286 | ||||||
Seagate Technology PLC | 14,286 | 574,726 | ||||||
|
| |||||||
11,410,054 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods 1.3% |
| |||||||
Michael Kors Holdings, Ltd. (a) | 21,639 | 1,199,017 | ||||||
Ralph Lauren Corp. | 10,406 | 1,348,722 | ||||||
|
| |||||||
2,547,739 | ||||||||
|
| |||||||
Tobacco 0.1% |
| |||||||
Altria Group, Inc. | 2,257 | 146,795 | ||||||
|
| |||||||
Trading Companies & Distributors 0.7% | ||||||||
W.W. Grainger, Inc. | 4,668 | 1,325,572 | ||||||
|
| |||||||
Total Common Stocks | 196,310,983 | |||||||
|
| |||||||
Exchange-Traded Funds 1.8% | ||||||||
SPDR S&P 500 ETF Trust | 12,986 | 3,514,401 | ||||||
|
| |||||||
Total Exchange-Traded Funds | 3,514,401 | |||||||
|
|
12 | MainStay MacKay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Short-Term Investment 0.0%‡ | ||||||||
Affiliated Investment Company 0.0%‡ | ||||||||
MainStay U.S. Government Liquidity Fund 2.075% (b) | 66,628 | $ | 66,628 | |||||
|
| |||||||
Total Short-Term Investment | 66,628 | |||||||
|
| |||||||
Total Investments | 100.0 | % | 199,892,012 | |||||
Other Assets, Less Liabilities | (0.0 | )‡ | (6,269 | ) | ||||
Net Assets | 100.0 | % | $ | 199,885,743 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | Non-income producing security. |
(b) | Current yield as of October 31, 2018. |
The following abbreviations are used in the preceding pages:
ETF—Exchange-Traded Fund
SPDR—Standard & Poor’s Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets:
Asset Valuation Inputs
Description | Quoted (Level 1) | Significant (Level 2) | Significant (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 196,310,983 | $ | — | $ | — | $ | 196,310,983 | ||||||||
Exchange-Traded Funds | 3,514,401 | — | — | 3,514,401 | ||||||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 66,628 | — | — | 66,628 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 199,892,012 | $ | — | $ | — | $ | 199,892,012 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Statement of Assets and Liabilities as of October 31, 2018
Assets |
| |||
Investment in securities, at value | $ | 199,825,384 | ||
Investment in affiliated investment companies, at value | 66,628 | |||
Cash | 48 | |||
Receivables: | ||||
Fund shares sold | 142,705 | |||
Dividends | 129,707 | |||
Other assets | 39,800 | |||
|
| |||
Total assets | 200,204,272 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Manager (See Note 3) | 92,730 | |||
Fund shares redeemed | 70,743 | |||
Investment securities purchased | 53,605 | |||
NYLIFE Distributors (See Note 3) | 35,839 | |||
Transfer agent (See Note 3) | 31,494 | |||
Shareholder communication | 17,097 | |||
Professional fees | 6,380 | |||
Custodian | 4,878 | |||
Trustees | 472 | |||
Accrued expenses | 5,291 | |||
|
| |||
Total liabilities | 318,529 | |||
|
| |||
Net assets | $ | 199,885,743 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 76,540 | ||
Additional paid-in capital | 158,693,951 | |||
|
| |||
158,770,491 | ||||
Total distributable earnings (loss) | 41,115,252 | |||
|
| |||
Net assets | $ | 199,885,743 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 63,955,740 | ||
|
| |||
Shares of beneficial interest outstanding | 2,430,408 | |||
|
| |||
Net asset value per share outstanding | $ | 26.31 | ||
Maximum sales charge (5.50% of offering price) | 1.53 | |||
|
| |||
Maximum offering price per share outstanding | $ | 27.84 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 16,579,516 | ||
|
| |||
Shares of beneficial interest outstanding | 630,632 | |||
|
| |||
Net asset value per share outstanding | $ | 26.29 | ||
Maximum sales charge (5.50% of offering price) | 1.53 | |||
|
| |||
Maximum offering price per share outstanding | $ | 27.82 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 5,855,287 | ||
|
| |||
Shares of beneficial interest outstanding | 243,556 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 24.04 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 14,963,744 | ||
|
| |||
Shares of beneficial interest outstanding | 622,911 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 24.02 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 98,394,764 | ||
|
| |||
Shares of beneficial interest outstanding | 3,721,270 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 26.44 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 136,692 | ||
|
| |||
Shares of beneficial interest outstanding | 5,223 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 26.17 | ||
|
|
14 | MainStay MacKay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) |
| |||
Income | ||||
Dividends—Unaffiliated | $ | 3,516,706 | ||
Dividends—Affiliated | 4,217 | |||
Interest | 535 | |||
Securities lending | 447 | |||
Other | 625 | |||
|
| |||
Total income | 3,522,530 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 1,033,294 | |||
Distribution/Service—Class A (See Note 3) | 152,906 | |||
Distribution/Service—Investor Class (See Note 3) | 43,485 | |||
Distribution/Service—Class B (See Note 3) | 63,987 | |||
Distribution/Service—Class C (See Note 3) | 159,390 | |||
Distribution/Service—Class R3 (See Note 3) | 584 | |||
Transfer agent (See Note 3) | 188,067 | |||
Registration | 102,328 | |||
Professional fees | 63,117 | |||
Shareholder communication | 37,365 | |||
Trustees | 4,219 | |||
Custodian | 3,593 | |||
Shareholder service (See Note 3) | 117 | |||
Miscellaneous | 15,536 | |||
|
| |||
Total expenses before waiver/reimbursement | 1,867,988 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (6,762 | ) | ||
|
| |||
Net expenses | 1,861,226 | |||
|
| |||
Net investment income (loss) | 1,661,304 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments |
| |||
Net realized gain (loss) on investments | 22,973,916 | |||
Net change in unrealized appreciation (depreciation) on investments | (10,553,207 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments | 12,420,709 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 14,082,013 | ||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,661,304 | $ | 1,918,011 | ||||
Net realized gain (loss) on investments | 22,973,916 | 16,992,315 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (10,553,207 | ) | 21,674,644 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 14,082,013 | 40,584,970 | ||||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (504,518 | ) | ||||||
Investor Class | (109,255 | ) | ||||||
Class B | — | |||||||
Class C | — | |||||||
Class I | (1,062,640 | ) | ||||||
Class R3 | (647 | ) | ||||||
|
| |||||||
(1,677,060 | ) | |||||||
|
| |||||||
Dividends to shareholders from net investment income: | ||||||||
Class A | (566,825 | ) | ||||||
Investor Class | (220,201 | ) | ||||||
Class B | (13,572 | ) | ||||||
Class C | (33,607 | ) | ||||||
Class I | (1,365,744 | ) | ||||||
Class R3 | (287 | ) | ||||||
|
| |||||||
(2,200,236 | ) | |||||||
|
| |||||||
Total dividends and distributions | (1,677,060 | ) | (2,200,236 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 59,074,323 | 24,691,224 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends | 1,632,738 | 2,141,327 | ||||||
Cost of shares redeemed | (62,972,216 | ) | (51,194,803 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (2,265,155 | ) | (24,362,252 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | 10,139,798 | 14,022,482 | ||||||
Net Assets |
| |||||||
Beginning of year | 189,745,945 | 175,723,463 | ||||||
|
| |||||||
End of year(2) | $ | 199,885,743 | $ | 189,745,945 | ||||
|
|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $1,518,583 in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
16 | MainStay MacKay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 24.56 | $ | 19.95 | $ | 20.20 | $ | 19.39 | $ | 16.59 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.24 | 0.23 | 0.25 | 0.20 | 0.18 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.74 | 4.63 | (0.28 | ) | 0.76 | 2.83 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.98 | 4.86 | (0.03 | ) | 0.96 | 3.01 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.23 | ) | (0.25 | ) | (0.22 | ) | (0.15 | ) | (0.21 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 26.31 | $ | 24.56 | $ | 19.95 | $ | 20.20 | $ | 19.39 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 8.07 | % | 24.59 | % | (0.13 | %) | 4.95 | % | 18.30 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.90 | % | 1.05 | % | 1.29 | % (c) | 1.01 | % | 0.98 | % | ||||||||||
Net expenses (d) | 0.97 | % | 0.96 | % | 0.95 | % (e) | 0.96 | % | 1.00 | % | ||||||||||
Portfolio turnover rate | 137 | % | 134 | % | 164 | % | 158 | % | 165 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 63,956 | $ | 53,909 | $ | 42,928 | $ | 52,985 | $ | 34,139 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.28%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 0.96%. |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 24.53 | $ | 19.93 | $ | 20.19 | $ | 19.38 | $ | 16.58 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.18 | 0.18 | 0.21 | 0.16 | 0.13 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.74 | 4.62 | (0.29 | ) | 0.76 | 2.82 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.92 | 4.80 | (0.08 | ) | 0.92 | 2.95 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.16 | ) | (0.20 | ) | (0.18 | ) | (0.11 | ) | (0.15 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 26.29 | $ | 24.53 | $ | 19.93 | $ | 20.19 | $ | 19.38 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 7.82 | % | 24.25 | % | (0.39 | %) | 4.77 | % | 17.94 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.68 | % | 0.83 | % | 1.05 | % (c) | 0.82 | % | 0.71 | % | ||||||||||
Net expenses (d) | 1.21 | % | 1.22 | % | 1.20 | % (e) | 1.17 | % | 1.28 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.23 | % | 1.22 | % | 1.20 | % (e) | 1.17 | % | 1.28 | % | ||||||||||
Portfolio turnover rate | 137 | % | 134 | % | 164 | % | 158 | % | 165 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 16,580 | $ | 17,216 | $ | 21,880 | $ | 22,939 | $ | 20,856 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.04%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.21%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 22.46 | $ | 18.25 | $ | 18.49 | $ | 17.81 | $ | 15.27 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.02 | ) | 0.01 | 0.05 | 0.02 | (0.00 | )‡ | |||||||||||||
Net realized and unrealized gain (loss) on investments | 1.60 | 4.24 | (0.26 | ) | 0.69 | 2.59 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.58 | 4.25 | (0.21 | ) | 0.71 | 2.59 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | — | (0.04 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 24.04 | $ | 22.46 | $ | 18.25 | $ | 18.49 | $ | 17.81 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 7.03 | % | 23.31 | % | (1.12 | %) | 4.01 | % | 17.00 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.07 | %) | 0.06 | % | 0.30 | % (c) | 0.09 | % | (0.03 | %) | ||||||||||
Net expenses (d) | 1.96 | % | 1.97 | % | 1.95 | % (e) | 1.92 | % | 2.03 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.98 | % | 1.97 | % | 1.95 | % (e) | 1.92 | % | 2.03 | % | ||||||||||
Portfolio turnover rate | 137 | % | 134 | % | 164 | % | 158 | % | 165 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 5,855 | $ | 6,635 | $ | 6,604 | $ | 6,816 | $ | 7,240 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.29%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.96%. |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 22.45 | $ | 18.24 | $ | 18.48 | $ | 17.80 | $ | 15.26 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.02 | ) | 0.01 | 0.06 | 0.01 | (0.02 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | 1.59 | 4.24 | (0.27 | ) | 0.70 | 2.61 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.57 | 4.25 | (0.21 | ) | 0.71 | 2.59 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | — | (0.04 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 24.02 | $ | 22.45 | $ | 18.24 | $ | 18.48 | $ | 17.80 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 6.99 | % | 23.33 | % | (1.12 | %) | 4.01 | % | 17.01 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.08 | %) | 0.06 | % | 0.34 | % (c) | 0.06 | % | (0.10 | %) | ||||||||||
Net expenses (d) | 1.96 | % | 1.97 | % | 1.95 | % (e) | 1.92 | % | 2.03 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.98 | % | 1.97 | % | 1.95 | % (e) | 1.92 | % | 2.03 | % | ||||||||||
Portfolio turnover rate | 137 | % | 134 | % | 164 | % | 158 | % | 165 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 14,964 | $ | 15,459 | $ | 16,509 | $ | 25,775 | $ | 16,536 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 0.33%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 1.96%. |
18 | MainStay MacKay Common Stock Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class I | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 24.67 | $ | 20.04 | $ | 20.29 | $ | 19.45 | $ | 16.64 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.31 | 0.29 | 0.31 | 0.26 | 0.22 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.74 | 4.65 | (0.29 | ) | 0.76 | 2.83 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 2.05 | 4.94 | 0.02 | 1.02 | 3.05 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||||||
From net investment income | (0.28 | ) | (0.31 | ) | (0.27 | ) | (0.18 | ) | (0.24 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 26.44 | $ | 24.67 | $ | 20.04 | $ | 20.29 | $ | 19.45 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 8.36 | % | 24.89 | % | 0.12 | % | 5.26 | % | 18.55 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 1.16 | % | 1.31 | % | 1.55 | %(c) | 1.30 | % | 1.24 | % | ||||||||||
Net expenses (d) | 0.71 | % | 0.71 | % | 0.70 | %(e) | 0.71 | % | 0.75 | % | ||||||||||
Portfolio turnover rate | 137 | % | 134 | % | 164 | % | 158 | % | 165 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 98,395 | $ | 96,441 | $ | 87,774 | $ | 91,561 | $ | 108,343 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Without the custody fee reimbursement, net investment income (loss) would have been 1.54%. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(e) | Without the custody fee reimbursement, net expenses would have been 0.71%. |
Year ended October 31, | February 29, 2016 * through October 31, | |||||||||||||||
Class R3 | 2018 | 2017 | 2016 | |||||||||||||
Net asset value at beginning of period | $ | 24.48 | $ | 19.90 | $ | 18.44 | ||||||||||
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.14 | 0.13 | 0.10 | |||||||||||||
Net realized and unrealized gain (loss) on investments | 1.73 | 4.65 | 1.36 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.87 | 4.78 | 1.46 | |||||||||||||
|
|
|
|
|
| |||||||||||
Less dividends: | ||||||||||||||||
From net investment income | (0.18 | ) | (0.20 | ) | — | |||||||||||
|
|
|
|
|
| |||||||||||
Net asset value at end of period | $ | 26.17 | $ | 24.48 | $ | 19.90 | ||||||||||
|
|
|
|
|
| |||||||||||
Total investment return (b) | 7.66 | % | 24.17 | % | 7.92 | %(c) | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||
Net investment income (loss) | 0.52 | % | 0.60 | % | 0.74 | %††(d) | ||||||||||
Net expenses (e) | 1.32 | % | 1.31 | % | 1.31 | %††(f) | ||||||||||
Portfolio turnover rate | 137 | % | 134 | % | 164 | % | ||||||||||
Net assets at end of period (in 000’s) | $ | 137 | $ | 86 | $ | 29 |
* | Inception date. |
†† | Annualized. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | Without the custody fee reimbursement, net investment income (loss) would have been 0.73%. |
(e) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(f) | Without the custody fee reimbursement, net expenses would have been 1.32%. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MacKay Common Stock Fund (formerly known as MainStay Common Stock Fund) (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has nine classes of shares registered for sale. Class A and Class B shares commenced operations on June 1, 1998. Class C shares commenced operations on September 1, 1998. Class I shares commenced operations on December 28, 2004. Investor Class shares commenced operations on February 28, 2008. Class R3 shares commenced operations on February 29, 2016. Class R2, Class R6 and Class T shares were registered for sale effective as of December 14, 2007 (for Class R2 shares) and February 28, 2017 (for Class R6 and Class T shares). As of October 31, 2018, Class R2, Class R6 and Class T shares were not yet offered for sale.
Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B
shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I and Class R3 shares are offered at NAV without a sales charge. Class R2 and Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Funds’ prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T, Class R2 and Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee. Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seek long-term growth of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment
20 | MainStay MacKay Common Stock Fund |
Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Broker/dealer quotes | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • Reported trades |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities, including shares of exchange-traded funds (“ETFs”), are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last
21 |
Notes to Financial Statements (continued)
quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income and distributions from net realized capital and currency gains, if any, at least
annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in ETFs and mutual funds, which are subject to management fees and other fees that may increase the costs of investing in ETFs and mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of ETFs and mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis
22 | MainStay MacKay Common Stock Fund |
to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of October 31, 2018, the Fund did not hold any repurchase agreements.
(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of October 31, 2018, the Fund did not have any portfolio securities on loan.
(I) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
(J) Large Transaction Risks. From time to time, the Fund may receive large purchase or redemption orders from affiliated or unaffiliated mutual funds or other investors. Such large transactions could have adverse effects on the Fund’s performance if the Fund were required to sell securities or invest cash at times when it otherwise would not do so. This activity could also accelerate the realization of capital gains and increase the Fund’s transaction costs. The Fund has
adopted procedures designed to mitigate the negative impacts of such large transactions, but there can be no assurance that these procedures will be effective.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. The Fund’s subadvisor changed effective January 1, 2018 due to an organizational restructuring whereby all investment personnel of Cornerstone Capital Management Holdings LLC, the former subadvisor, transitioned to MacKay Shields LLC (“MacKay Shields” or the “Subadvisor”), a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life. MacKay Shields serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of an Amended and Restated Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and MacKay Shields, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.55% up to $500 million; 0.525% from $500 million to $1 billion; and 0.50% on assets in excess of $1 billion. During the year ended October 31, 2018, the effective management fee rate was 0.55%.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
New York Life Investments has agreed to voluntarily waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase and sale of portfolio investments, and acquired (underlying) fund fees and expenses) of a class do not exceed the following percentages of average daily net assets: Investor Class, 1.85%; Class B, 2.60%; and Class C, 2.60%. These voluntary waivers or reimbursements may be discontinued at any time without notice.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $1,033,294 and voluntarily
23 |
Notes to Financial Statements (continued)
waived and/or reimbursed certain class specific expenses in the amount of $6,762.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plan for the Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily
net assets of the Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the year ended October 31, 2018, shareholder service fees incurred by the Fund were as follows:
Class R3 | $ | 117 |
(C) Sales Charges. During the year ended October 31, 2018, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $21,389 and $13,410, respectively.
During the year ended October 31, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $468, $6,188 and $1,076, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 27,505 | ||
Investor Class | 53,367 | |||
Class B | 19,642 | |||
Class C | 48,905 | |||
Class I | 38,595 | |||
Class R3 | 53 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the year ended October 31, 2018, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Companies | Value, Beginning of Year | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Year | Dividend Income | Other Distributions | Shares End of Year | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | — | $ | 33,641 | $ | (33,574 | ) | $ | — | $ | — | $ | 67 | $ | 4 | $ | — | 67 | ||||||||||||||||||
|
|
24 | MainStay MacKay Common Stock Fund |
(G) Capital. As of October 31, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class R3 | $ | 36,065 | 26.4% |
Note 4–Federal Income Tax
As of October 31, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 181,003,377 | $ | 23,445,810 | $ | (4,557,175 | ) | $ | 18,888,635 |
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary Income | Accumulated Other Gain (Loss) | Other Temporary Differences | Unrealized Appreciation (Depreciation) | Total Gain (Loss) | ||||
$7,939,835 | $14,286,782 | $— | $18,888,635 | $41,115,252 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily due to wash sale adjustments.
The following table discloses the current year reclassifications between total distributable earnings (loss) and additional paid-in capital arising from permanent differences; net assets as of October 31, 2018 were not affected.
Total | Additional Paid-In Capital | |
$(2,957,197) | $2,957,197 |
The reclassifications for the Fund are primarily due to equalization.
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 1,677,060 | $ | 2,200,236 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to July 31, 2018, the aggregate commitment amount and the commitment fee were the same as those under the current Credit Agreement. During the year ended October 31, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the year ended October 31, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2018, purchases and sales of securities, other than short-term securities, were $257,265 and $259,685, respectively.
25 |
Notes to Financial Statements (continued)
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 567,715 | $ | 14,915,276 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 19,112 | 488,895 | ||||||
Shares redeemed | (490,183 | ) | (12,797,701 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 96,644 | 2,606,470 | ||||||
Shares converted into Class A (See Note 1) | 152,900 | 4,063,461 | ||||||
Shares converted from Class A (See Note 1) | (14,162 | ) | (374,984 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 235,382 | $ | 6,294,947 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 393,517 | $ | 8,513,051 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 25,363 | 534,139 | ||||||
Shares redeemed | (717,930 | ) | (15,610,015 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (299,050 | ) | (6,562,825 | ) | ||||
Shares converted into Class A (See Note 1) | 456,429 | 10,647,626 | ||||||
Shares converted from Class A (See Note 1) | (113,732 | ) | (2,425,120 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 43,647 | $ | 1,659,681 | |||||
|
|
|
| |||||
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 103,313 | $ | 2,733,830 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,927 | 100,577 | ||||||
Shares redeemed | (66,844 | ) | (1,765,739 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 40,396 | 1,068,668 | ||||||
Shares converted into Investor Class (See Note 1) | 29,664 | 788,176 | ||||||
Shares converted from Investor Class (See Note 1) | (141,244 | ) | (3,754,085 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (71,184 | ) | $ | (1,897,241 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 110,568 | $ | 2,444,395 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 10,399 | 219,211 | ||||||
Shares redeemed | (116,386 | ) | (2,567,501 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 4,581 | 96,105 | ||||||
Shares converted into Investor Class (See Note 1) | 50,589 | 1,124,737 | ||||||
Shares converted from Investor Class (See Note 1) | (451,184 | ) | (10,522,222 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (396,014 | ) | $ | (9,301,380 | ) | |||
|
|
|
| |||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 17,385 | $ | 425,028 | |||||
Shares redeemed | (39,619 | ) | (950,724 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (22,234 | ) | (525,696 | ) | ||||
Shares converted from Class B (See Note 1) | (29,591 | ) | (722,568 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (51,825 | ) | $ | (1,248,264 | ) | |||
|
|
|
|
Class B | Shares | Amount | ||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 42,927 | $ | 843,620 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 670 | 13,018 | ||||||
Shares redeemed | (60,581 | ) | (1,223,993 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (16,984 | ) | (367,355 | ) | ||||
Shares converted from Class B (See Note 1) | (49,518 | ) | (1,012,159 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (66,502 | ) | $ | (1,379,514 | ) | |||
|
|
|
| |||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 87,450 | $ | 2,084,523 | |||||
Shares redeemed | (153,217 | ) | (3,697,525 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (65,767 | ) | $ | (1,613,002 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 128,887 | $ | 2,555,519 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,201 | 23,317 | ||||||
Shares redeemed | (346,562 | ) | (6,966,498 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (216,474 | ) | $ | (4,387,662 | ) | |||
|
|
|
| |||||
Class I | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,421,800 | $ | 38,823,618 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 40,660 | 1,042,924 | ||||||
Shares redeemed | (1,650,017 | ) | (43,712,786 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | (187,557 | ) | $ | (3,846,244 | ) | |||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 469,078 | $ | 10,275,846 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 64,045 | 1,351,355 | ||||||
Shares redeemed | (1,106,144 | ) | (24,817,068 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (573,021 | ) | (13,189,867 | ) | ||||
Shares converted into Class I (See Note 1) | 102,691 | 2,187,138 | ||||||
|
|
|
| |||||
Net increase (decrease) | (470,330 | ) | $ | (11,002,729 | ) | |||
|
|
|
| |||||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,394 | $ | 92,048 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 13 | 342 | ||||||
Shares redeemed | (1,694 | ) | (47,741 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 1,713 | $ | 44,649 | |||||
|
|
|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 2,509 | $ | 58,793 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 13 | 287 | ||||||
Shares redeemed | (445 | ) | (9,728 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 2,077 | $ | 49,352 | |||||
|
|
|
|
26 | MainStay MacKay Common Stock Fund |
Note 10–Litigation
The Fund has been named as a defendant in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (the “FitzSimons action”) as a result of its ownership of shares in the Tribune Company (“Tribune”) in 2007 when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In its complaint, the plaintiff asserts claims against certain insiders, shareholders, professional advisers, and others involved in the LBO. Separately, the complaint also seeks to obtain from former Tribune shareholders, including the Fund, any proceeds they received in connection with the LBO. The sole claim and cause of action brought against the Fund is for fraudulent conveyance pursuant to United States Bankruptcy Code Section 548(a)(1)(A).
In June 2011, certain Tribune creditors filed numerous additional actions asserting state law constructive fraudulent conveyance claims (the “SLCFC actions”) against specifically-named former Tribune shareholders and, in some cases, putative defendant classes comprised of former Tribune shareholders. One of the SLCFC actions, entitled Deutsche Bank Trust Co. Americas v. Blackrock Institutional Trust Co., No. 11-9319 (S.D.N.Y.) (the “Deutsche Bank action”), named the Fund as a defendant.
The FitzSimons action and Deutsche Bank action have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding entitled In re Tribune Co. Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ motion to dismiss the SLCFC actions, including the Deutsche Bank action, on the basis that the plaintiffs did not have standing to pursue their claims. On September 30, 2013, the plaintiffs in the SLCFC actions filed a notice of appeal to the United States Court of Appeals for the Second Circuit. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On November 5, 2014, the Second Circuit Court of Appeals held an oral argument on appeal. On March 29, 2016, the United States Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. Certain shareholder defendants filed a joint brief in opposition to the petition for certiorari on October 24, 2016. The plaintiffs filed a reply in support of the petition on November 4, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, plaintiffs filed in the Second Circuit a motion for that
court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed a response to plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.”
On August 2, 2013, the plaintiff in the FitzSimons action filed a Fifth Amended Complaint. On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. The Court’s order is not immediately appealable, but the plaintiff has asked the Court to direct entry of a final judgment in order to make the order immediately appealable. On February 23, 2017, the Court issued an order stating that it intends to permit an interlocutory appeal of the dismissal order, but will wait to do so until it has resolved outstanding motions to dismiss filed by other defendants. Accordingly, the timing of the appeal is uncertain.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, plaintiff renewed the request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management. The shareholder defendants opposed that request. On June 18, 2018, the District Court ordered that the request would be stayed pending further action by the Second Circuit in the still-pending appeal, discussed above.
The value of the proceeds received by the Fund in connection with the LBO and the Fund’s cost basis in shares of Tribune was as follows:
Fund | Proceeds | Cost Basis | ||||||
MainStay MacKay Common Stock Fund | $ | 751,774 | $ | 729,369 |
At this stage of the proceedings, it would be difficult to assess with any reasonable certainty the probable outcome of the pending litigation or the effect, if any, on the Fund’s net asset value.
Note 11–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
27 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The MainStay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MainStay MacKay Common Stock Fund (formerly MainStay Common Stock Fund) (the Fund), one of the funds constituting The MainStay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years or periods in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians, the transfer agent, and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
28 | MainStay MacKay Common Stock Fund |
Federal Income Tax Information
(Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders in a written statement as to the federal tax status of dividends paid by the Fund during such fiscal years.
For the fiscal year ended October 31, 2018, the Fund designated approximately $1,585,199 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2018 should be multiplied by 94.47% to arrive at the amount eligible for the corporate dividend-received deduction.
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
29 |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
30 | MainStay MacKay Common Stock Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
31 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
32 | MainStay MacKay Common Stock Fund |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
* | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
33 |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1716826 MS293-18 | MSCS11-12/18 (NYLIM) NL219 |
MainStay Large Cap Growth Fund
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class A shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
(With sales charges)
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception Date | One Year | Five Years | Ten Years or Since Inception | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 7/1/1995 | | 6.18 12.36 | %
| | 10.59 11.85 | %
| | 13.68 14.32 | %
| | 1.00 1.00 | %
| |||||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | 2/28/2008 | | 6.02 12.19 |
| | 10.50 11.76 |
| | 13.55 14.19 |
| | 1.07 1.07 |
| |||||||||
Class B Shares3 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | | 4/1/2005 | | | 6.81 11.42 |
| | 10.74 10.97 |
| | 13.37 13.37 |
| | 1.82 1.82 |
| |||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 4/1/2005 | | | 10.50 11.42 |
| | 10.94 10.94 |
| | 13.35 13.35 |
| | 1.82 1.82 |
| |||||||
Class I Shares | No Sales Charge | 4/1/2005 | 12.65 | 12.14 | 14.62 | 0.75 | ||||||||||||||||||
Class R1 Shares | No Sales Charge | 4/1/2005 | 12.46 | 12.03 | 14.49 | 0.85 | ||||||||||||||||||
Class R2 Shares | No Sales Charge | 4/1/2005 | 12.29 | 11.76 | 14.21 | 1.10 | ||||||||||||||||||
Class R3 Shares | No Sales Charge | 4/28/2006 | 11.97 | 11.47 | 13.92 | 1.35 | ||||||||||||||||||
Class R6 Shares | No Sales Charge | 6/17/2013 | 12.72 | 12.25 | 14.15 | 0.63 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations (if any), please refer to the Notes to Financial Statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
Russell 1000® Growth Index4 | 10.71 | % | 13.43 | % | 15.45 | % | ||||||
S&P 500® Index5 | 7.35 | 11.34 | 13.24 | |||||||||
Morningstar Large Growth Category Average6 | 8.70 | 11.05 | 13.73 |
4. | The Russell 1000® Growth Index is the Fund’s primary broad-based securities market index for comparison purposes. The Russell 1000® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000® Index companies with higher price-to-book ratios and higher forecasted growth values. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The S&P 500® Index is the Fund’s secondary benchmark. “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock- |
market performance. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Large Growth Category Average is representative of funds that invest primarily in big U.S. companies that are projected to grow faster than other large-cap stocks. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap. Growth is defined based on fast growth and high valuations. Most of these portfolios focus on companies in rapidly expanding industries. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay Large Cap Growth Fund |
Cost in Dollars of a $1,000 Investment in MainStay Large Cap Growth Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 10/31/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,023.70 | $ | 4.95 | $ | 1,020.32 | $ | 4.94 | 0.97% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,022.90 | $ | 5.40 | $ | 1,019.86 | $ | 5.40 | 1.06% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,019.70 | $ | 9.21 | $ | 1,016.08 | $ | 9.20 | 1.81% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,019.80 | $ | 9.21 | $ | 1,016.08 | $ | 9.20 | 1.81% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,025.90 | $ | 3.68 | $ | 1,021.58 | $ | 3.67 | 0.72% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,024.60 | $ | 4.18 | $ | 1,021.07 | $ | 4.18 | 0.82% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,023.80 | $ | 5.46 | $ | 1,019.81 | $ | 5.45 | 1.07% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,021.70 | $ | 6.73 | $ | 1,018.55 | $ | 6.72 | 1.32% | |||||||||||
Class R6 Shares | $ | 1,000.00 | $ | 1,025.70 | $ | 3.22 | $ | 1,022.03 | $ | 3.21 | 0.63% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Industry Composition as of October 31, 2018 (Unaudited)
IT Services | 17.3 | % | ||
Software | 15.2 | |||
Interactive Media & Services | 8.2 | |||
Internet & Direct Marketing Retail | 7.5 | |||
Aerospace & Defense | 5.7 | |||
Health Care Equipment & Supplies | 5.4 | |||
Life Sciences Tools & Services | 4.5 | |||
Health Care Providers & Services | 4.1 | |||
Semiconductors & Semiconductor Equipment | 4.1 | |||
Capital Markets | 3.9 | |||
Chemicals | 3.0 | |||
Equity Real Estate Investment Trusts | 2.6 | |||
Pharmaceuticals | 2.4 | |||
Specialty Retail | 2.3 |
Textiles, Apparel & Luxury Goods | 2.3 | % | ||
Entertainment | 2.2 | |||
Automobiles | 1.5 | |||
Industrial Conglomerates | 1.5 | |||
Road & Rail | 1.5 | |||
Machinery | 1.2 | |||
Health Care Technology | 1.1 | |||
Professional Services | 1.0 | |||
Banks | 0.8 | |||
Building Products | 0.0 | ‡ | ||
Short-Term Investment | 1.7 | |||
Other Assets, Less Liabilities | –1.0 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 10 for specific holdings within these categories. The Fund’s Portfolio is subject to change.
‡ Less than one-tenth of a percent.
Top Ten Holdings or Issuers Held as of October 31, 2018 (excluding short-term investment) (Unaudited)
1. | Microsoft Corp. |
2. | Alphabet, Inc. |
3. | Amazon.com, Inc. |
4. | Visa, Inc., Class A |
5. | UnitedHealth Group, Inc. |
6. salesforce.com, Inc.
7. | PayPal Holdings, Inc. |
8. | Adobe, Inc. |
9. | Mastercard, Inc., Class A |
10. | American Tower Corp. |
8 | MainStay Large Cap Growth Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Justin H. Kelly, CFA, and Patrick M. Burton, CFA, of Winslow Capital Management, LLC, the Fund’s Subadvisor.
How did MainStay Large Cap Growth Fund perform relative to its benchmarks and peer group during the 12 months ended October 31, 2018?
For the 12 months ended October 31, 2018, Class I shares of MainStay Large Cap Growth Fund returned 12.65%, outperforming the 10.71% return of the Fund’s primary benchmark, the Russell 1000® Growth Index. Over the same period, Class I shares outperformed the 7.35% return of the S&P 500® Index, which is the Fund’s secondary benchmark, and the 8.70% return of the Morningstar Large Growth Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
The Fund solidly outperformed the Russell 1000® Growth Index during the reporting period as the effects of security selection and sector allocation both contributed positively to relative performance. (Contributions take weightings and total returns into account.) Of these two factors, the effect of security selection was more substantial. Security selection was especially strong in the health care and information technology sectors. On the other hand, security selection was weakest in the consumer discretionary and communication services sectors.
During the reporting period, the Fund’s relative outperformance was broad-based, as eight of eleven sectors contributed positively to the Fund’s performance relative to the Russell 1000® Growth Index.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
The information technology and health care sectors were the strongest positive contributors to the Fund’s relative performance during the reporting period. The consumer discretionary and communication services sectors, on the other hand, were the most substantial detractors from the Fund’s relative performance.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
The stocks that made the strongest positive contributions to the Fund’s absolute performance during the reporting period were
e-commerce and cloud computing company Amazon.com and multinational technology company Microsoft.
The stocks that detracted the most from the Fund’s absolute performance during the reporting period were semiconductor equipment and services company Applied Materials and video game company Electronic Arts. The Fund sold its position in Applied Materials during the reporting period but continued to hold a position in Electronic Arts.
What were some of the Fund’s largest purchases and sales during the reporting period?
During the reporting period, the Fund’s largest new purchases included positions in home improvement retailer Lowe’s and global aircraft manufacturer Boeing. The Fund’s largest sales during the reporting period included shares of social media company Facebook and multinational technology company Apple.
How did the Fund’s sector weightings change during the reporting period?
The sector weightings that saw the largest increases during the reporting period were the newly created communication services sector, which rose from 0% to 10% of net assets, and the industrials sector, which increased from 9% to 11% of net assets.
The sector weightings that decreased the most during the reporting period were the information technology sector, which decreased from 49% to 37% of net assets, and the consumer discretionary sector, which declined from 17% to 14% of net assets.
How was the Fund positioned at the end of the reporting period?
As of October 31, 2018, the Fund’s exposure across Winslow Capital Management’s proprietary three types of growth was as follows: 40% consistent growth (companies that have greater earnings-per-share growth than the market and are demonstrably not cyclical), 36% dynamic growth (companies that have dynamic positions with superior competitive advantages and that generate revenue growth at or above 10%) and 23% cyclical growth (companies that have exposure to product, industry, regulatory or economic cycles and have prospects for superior earnings growth in the coming 24 months).
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
9 |
Portfolio of Investments October 31, 2018
Shares | Value | |||||||
Common Stocks 99.3%† |
| |||||||
Aerospace & Defense 5.7% |
| |||||||
Boeing Co. | 791,600 | $ | 280,907,176 | |||||
Northrop Grumman Corp. | 709,500 | 185,853,525 | ||||||
Raytheon Co. | 1,121,700 | 196,342,368 | ||||||
|
| |||||||
663,103,069 | ||||||||
|
| |||||||
Automobiles 1.5% |
| |||||||
Ferrari N.V. | 1,481,100 | 173,451,621 | ||||||
|
| |||||||
Banks 0.8% |
| |||||||
JPMorgan Chase & Co. | 819,900 | 89,385,498 | ||||||
|
| |||||||
Building Products 0.0%‡ |
| |||||||
Resideo Technologies, Inc. (a) | 17 | 351 | ||||||
|
| |||||||
Capital Markets 3.9% |
| |||||||
Intercontinental Exchange, Inc. | 3,091,000 | 238,130,640 | ||||||
Moody’s Corp. | 1,461,650 | 212,640,842 | ||||||
|
| |||||||
450,771,482 | ||||||||
|
| |||||||
Chemicals 3.0% |
| |||||||
Linde PLC | 1,242,200 | 205,546,834 | ||||||
Sherwin-Williams Co. | 351,975 | 138,491,603 | ||||||
|
| |||||||
344,038,437 | ||||||||
|
| |||||||
Entertainment 2.2% |
| |||||||
Electronic Arts, Inc. (a) | 1,558,550 | 141,796,879 | ||||||
Netflix, Inc. (a) | 390,800 | 117,935,624 | ||||||
|
| |||||||
259,732,503 | ||||||||
|
| |||||||
Equity Real Estate Investment Trusts 2.6% |
| |||||||
American Tower Corp. | 1,936,950 | 301,796,180 | ||||||
|
| |||||||
Health Care Equipment & Supplies 5.4% |
| |||||||
Abbott Laboratories | 2,186,700 | 150,751,098 | ||||||
Align Technology, Inc. (a) | 575,000 | 127,190,000 | ||||||
Becton Dickinson & Co. | 676,050 | 155,829,525 | ||||||
Stryker Corp. | 1,173,000 | 190,284,060 | ||||||
|
| |||||||
624,054,683 | ||||||||
|
| |||||||
Health Care Providers & Services 4.1% |
| |||||||
UnitedHealth Group, Inc. | 1,800,950 | 470,678,283 | ||||||
|
| |||||||
Health Care Technology 1.1% |
| |||||||
Veeva Systems, Inc., Class A (a) | 1,397,800 | 127,689,030 | ||||||
|
| |||||||
Industrial Conglomerates 1.5% |
| |||||||
Honeywell International, Inc. | 1,194,900 | 173,045,418 | ||||||
|
|
Shares | Value | |||||||
Interactive Media & Services 8.2% |
| |||||||
Alphabet, Inc. (a) | ||||||||
Class A | 330,080 | $ | 359,978,646 | |||||
Class C | 334,331 | 359,997,591 | ||||||
Facebook, Inc., Class A (a) | 1,502,500 | 228,064,475 | ||||||
|
| |||||||
948,040,712 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail 7.5% |
| |||||||
Amazon.com, Inc. (a) | 373,440 | 596,760,855 | ||||||
Booking Holdings, Inc. (a) | 60,740 | 113,861,989 | ||||||
Expedia Group, Inc. | 1,233,200 | 154,680,276 | ||||||
|
| |||||||
865,303,120 | ||||||||
|
| |||||||
IT Services 17.3% |
| |||||||
Automatic Data Processing, Inc. | 1,296,900 | 186,857,352 | ||||||
Fidelity National Information Services, Inc. | 1,397,150 | 145,443,315 | ||||||
Fiserv, Inc. (a) | 2,006,400 | 159,107,520 | ||||||
GoDaddy, Inc., Class A (a) | 2,583,900 | 189,063,963 | ||||||
Mastercard, Inc., Class A | 1,555,850 | 307,544,870 | ||||||
Pagseguro Digital, Ltd., Class A (a) | 4,381,200 | 118,248,588 | ||||||
PayPal Holdings, Inc. (a) | 3,938,150 | 331,552,848 | ||||||
Visa, Inc., Class A | 4,042,650 | 557,279,302 | ||||||
|
| |||||||
1,995,097,758 | ||||||||
|
| |||||||
Life Sciences Tools & Services 4.5% |
| |||||||
Agilent Technologies, Inc. | 1,777,400 | 115,157,746 | ||||||
Illumina, Inc. (a) | 600,400 | 186,814,460 | ||||||
Thermo Fisher Scientific, Inc. | 923,500 | 215,775,775 | ||||||
|
| |||||||
517,747,981 | ||||||||
|
| |||||||
Machinery 1.2% |
| |||||||
Fortive Corp. | 1,832,100 | 136,033,425 | ||||||
|
| |||||||
Pharmaceuticals 2.4% |
| |||||||
Bristol-Myers Squibb Co. | 2,379,800 | 120,275,092 | ||||||
Zoetis, Inc. | 1,792,300 | 161,575,845 | ||||||
|
| |||||||
281,850,937 | ||||||||
|
| |||||||
Professional Services 1.0% |
| |||||||
CoStar Group, Inc. (a) | 320,410 | 115,802,582 | ||||||
|
| |||||||
Road & Rail 1.5% |
| |||||||
Union Pacific Corp. | 1,175,700 | 171,910,854 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 4.1% |
| |||||||
ASML Holding N.V., Registered | 644,750 | 111,129,110 | ||||||
NVIDIA Corp. | 754,300 | 159,029,069 | ||||||
Xilinx, Inc. | 2,414,600 | 206,134,402 | ||||||
|
| |||||||
476,292,581 | ||||||||
|
|
10 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Software 15.2% |
| |||||||
Adobe, Inc. (a) | 1,326,800 | $ | 326,074,368 | |||||
Intuit, Inc. | 784,150 | 165,455,650 | ||||||
Microsoft Corp. | 7,711,900 | 823,708,039 | ||||||
salesforce.com, Inc. (a) | 3,186,350 | 437,294,674 | ||||||
|
| |||||||
1,752,532,731 | ||||||||
|
| |||||||
Specialty Retail 2.3% |
| |||||||
Lowe’s Cos., Inc. | 2,728,300 | 259,788,726 | ||||||
|
| |||||||
Textiles, Apparel & Luxury Goods 2.3% |
| |||||||
NIKE, Inc., Class B | 3,589,600 | 269,363,584 | ||||||
|
| |||||||
Total Common Stocks | 11,467,511,546 | |||||||
|
|
Shares | Value | |||||||
Short-Term Investment 1.7% |
| |||||||
Affiliated Investment Company 1.7% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.075% (b)(c) | 199,452,051 | $ | 199,452,051 | |||||
|
| |||||||
Total Affiliated Investment Company | 199,452,051 | |||||||
|
| |||||||
Total Short-Term Investment | 199,452,051 | |||||||
|
| |||||||
Total Investments | 101.0 | % | 11,666,963,597 | |||||
Other Assets, Less Liabilities | (1.0 | ) | (116,342,828 | ) | ||||
Net Assets | 100.0 | % | $ | 11,550,620,769 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | Non-income producing security. |
(b) | Current yield as of October 31, 2018. |
(c) | As of October 31, 2018, the Fund’s ownership exceeds 5% of the outstanding shares of the Underlying Fund’s share class. |
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets:
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 11,467,511,546 | $ | — | $ | — | $ | 11,467,511,546 | ||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 199,452,051 | — | — | 199,452,051 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 11,666,963,597 | $ | — | $ | — | $ | 11,666,963,597 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 11 |
Statement of Assets and Liabilities as of October 31, 2018
Assets |
| |||
Investment in securities, at value | $ | 11,467,511,546 | ||
Investment in affiliated investment companies, at value (identified cost $199,452,051) | 199,452,051 | |||
Cash | 323 | |||
Receivables: | ||||
Investment securities sold | 182,105,317 | |||
Fund shares sold | 8,667,565 | |||
Dividends | 4,583,334 | |||
Other assets | 106,723 | |||
|
| |||
Total assets | 11,862,426,859 | |||
|
| |||
Liabilities |
| |||
Payables: | ||||
Investment securities purchased | 254,837,745 | |||
Fund shares redeemed | 47,847,020 | |||
Manager (See Note 3) | 6,475,848 | |||
Transfer agent (See Note 3) | 1,564,339 | |||
NYLIFE Distributors (See Note 3) | 543,488 | |||
Shareholder communication | 182,237 | |||
Professional fees | 146,866 | |||
Custodian | 92,327 | |||
Trustees | 31,646 | |||
Accrued expenses | 84,574 | |||
|
| |||
Total liabilities | 311,806,090 | |||
|
| |||
Net assets | $ | 11,550,620,769 | ||
|
| |||
Composition of Net Assets |
| |||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 10,986,739 | ||
Additional paid-in capital | 5,227,240,254 | |||
|
| |||
5,238,226,993 | ||||
Total distributable earnings (loss) | 6,312,393,776 | |||
|
| |||
Net assets | $ | 11,550,620,769 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 1,092,961,691 | ||
|
| |||
Shares of beneficial interest outstanding | 109,885,499 | |||
|
| |||
Net asset value per share outstanding | $ | 9.95 | ||
Maximum sales charge (5.50% of offering price) | 0.58 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.53 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 103,987,304 | ||
|
| |||
Shares of beneficial interest outstanding | 10,600,647 | |||
|
| |||
Net asset value per share outstanding | $ | 9.81 | ||
Maximum sales charge (5.50% of offering price) | 0.57 | |||
|
| |||
Maximum offering price per share outstanding | $ | 10.38 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 25,685,043 | ||
|
| |||
Shares of beneficial interest outstanding | 3,108,457 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.26 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 197,230,850 | ||
|
| |||
Shares of beneficial interest outstanding | 23,915,602 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 8.25 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 6,275,779,626 | ||
|
| |||
Shares of beneficial interest outstanding | 586,944,690 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.69 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 1,102,422,936 | ||
|
| |||
Shares of beneficial interest outstanding | 105,723,889 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.43 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 227,298,385 | ||
|
| |||
Shares of beneficial interest outstanding | 22,952,414 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.90 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 61,850,043 | ||
|
| |||
Shares of beneficial interest outstanding | 6,574,543 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 9.41 | ||
|
| |||
Class R6 | ||||
Net assets applicable to outstanding shares | $ | 2,463,404,891 | ||
|
| |||
Shares of beneficial interest outstanding | 228,968,167 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 10.76 | ||
|
|
12 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) |
| |||
Income | ||||
Unaffiliated dividends (a) | $ | 93,897,142 | ||
Dividend distributions from affiliated investment companies | 536,013 | |||
Interest | 295,583 | |||
Other | 40,277 | |||
|
| |||
Total income | 94,769,015 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 76,819,889 | |||
Transfer agent (See Note 3) | 9,348,848 | |||
Distribution/Service—Class A (See Note 3) | 2,374,287 | |||
Distribution/Service—Investor Class (See Note 3) | 278,846 | |||
Distribution/Service—Class B (See Note 3) | 302,126 | |||
Distribution/Service—Class C (See Note 3) | 2,192,237 | |||
Distribution/Service—Class R2 (See Note 3) | 693,871 | |||
Distribution/Service—Class R3 (See Note 3) | 345,672 | |||
Shareholder service (See Note 3) | 1,837,625 | |||
Professional fees | 679,646 | |||
Shareholder communication | 463,759 | |||
Trustees | 279,937 | |||
Registration | 214,131 | |||
Custodian | 168,876 | |||
Miscellaneous | 424,596 | |||
|
| |||
Total expenses before waiver/reimbursement | 96,424,346 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (374,784 | ) | ||
|
| |||
Net expenses | 96,049,562 | |||
|
| |||
Net investment income (loss) | (1,280,547 | ) | ||
|
| |||
Realized and Unrealized Gain (Loss) on Investments |
| |||
Net realized gain (loss) on investments | 2,288,400,255 | |||
Net change in unrealized appreciation (depreciation) on investments | (810,084,748 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments | 1,478,315,507 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 1,477,034,960 | ||
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $444,736. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | (1,280,547 | ) | $ | 7,219,818 | |||
Net realized gain (loss) on investments | 2,288,400,255 | 2,125,171,899 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (810,084,748 | ) | 1,093,100,385 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 1,477,034,960 | 3,225,492,102 | ||||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (129,538,086 | ) | ||||||
Investor Class | (16,387,495 | ) | ||||||
Class B | (5,472,548 | ) | ||||||
Class C | (38,578,584 | ) | ||||||
Class I | (948,232,853 | ) | ||||||
Class R1 | (224,360,524 | ) | ||||||
Class R2 | (45,003,587 | ) | ||||||
Class R3 | (12,069,586 | ) | ||||||
Class R6 | (294,234,482 | ) | ||||||
|
| |||||||
(1,713,877,745 | ) | |||||||
|
| |||||||
Distributions to shareholders from net realized gain on investments: | ||||||||
Class A | (97,685,398 | ) | ||||||
Investor Class | (19,306,165 | ) | ||||||
Class B | (4,699,003 | ) | ||||||
Class C | (37,641,042 | ) | ||||||
Class I | (952,688,820 | ) | ||||||
Class R1 | (180,061,866 | ) | ||||||
Class R2 | (43,793,657 | ) | ||||||
Class R3 | (10,344,534 | ) | ||||||
Class R6 | (180,099,811 | ) | ||||||
|
| |||||||
(1,526,320,296 | ) | |||||||
|
| |||||||
Total distributions to shareholders | (1,713,877,745 | ) | (1,526,320,296 | ) | ||||
|
| |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 2,653,181,595 | 2,399,225,432 | ||||||
Net asset value of shares issued to shareholders in reinvestment of distributions | 1,568,090,662 | 1,231,556,918 | ||||||
Cost of shares redeemed | (4,616,519,806 | ) | (7,343,872,524 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (395,247,549 | ) | (3,713,090,174 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (632,090,334 | ) | (2,013,918,368 | ) |
2018 | 2017 | |||||||
Net Assets |
| |||||||
Beginning of year | 12,182,711,103 | 14,196,629,471 | ||||||
|
| |||||||
End of year(2) | $ | 11,550,620,769 | $ | 12,182,711,103 | ||||
|
|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $7,443,041 in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
14 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.41 | $ | 9.17 | $ | 10.68 | $ | 10.91 | $ | 9.98 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.02 | ) | (0.01 | ) | (0.01 | ) | (0.02 | ) | (0.02 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 1.12 | 2.31 | (0.23 | ) | 0.85 | 1.45 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.10 | 2.30 | (0.24 | ) | 0.83 | 1.43 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.00 | )‡ | — | — | — | — | ||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.95 | $ | 10.41 | $ | 9.17 | $ | 10.68 | $ | 10.91 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 12.36 | % | 28.54 | % | (2.44 | %) | 8.10 | % | 14.95 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.21 | %) | (0.15 | %) | (0.13 | %) | (0.23 | %) | (0.22 | %) | ||||||||||
Net expenses (c) | 0.97 | % | 1.00 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 0.98 | % | 1.00 | % | 1.00 | % | 0.99 | % | 0.99 | % | ||||||||||
Portfolio turnover rate | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 1,092,962 | $ | 960,123 | $ | 882,021 | $ | 1,202,852 | $ | 1,304,641 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.30 | $ | 9.09 | $ | 10.61 | $ | 10.84 | $ | 9.93 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.03 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.03 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 1.10 | 2.29 | (0.23 | ) | 0.86 | 1.44 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.07 | 2.27 | (0.25 | ) | 0.83 | 1.41 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.81 | $ | 10.30 | $ | 9.09 | $ | 10.61 | $ | 10.84 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 12.19 | % | 28.45 | % | (2.57 | %) | 8.16 | % | 14.82 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.30 | %) | (0.19 | %) | (0.19 | %) | (0.28 | %) | (0.28 | %) | ||||||||||
Net expenses (c) | 1.06 | % | 1.07 | % | 1.05 | % | 1.04 | % | 1.04 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 1.07 | % | 1.07 | % | 1.06 | % | 1.04 | % | 1.04 | % | ||||||||||
Portfolio turnover rate | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 103,987 | $ | 108,078 | $ | 167,631 | $ | 180,154 | $ | 199,826 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.98 | $ | 8.11 | $ | 9.67 | $ | 10.04 | $ | 9.29 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.09 | ) | (0.08 | ) | (0.08 | ) | (0.10 | ) | (0.10 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.93 | 2.01 | (0.21 | ) | 0.79 | 1.35 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.84 | 1.93 | (0.29 | ) | 0.69 | 1.25 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 8.26 | $ | 8.98 | $ | 8.11 | $ | 9.67 | $ | 10.04 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 11.28 | %(c) | 27.61 | % | (3.32 | %) | 7.34 | % | 14.08 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (1.04 | %) | (0.96 | %) | (0.94 | %) | (1.03 | %) | (1.02 | %) | ||||||||||
Net expenses (d) | 1.81 | % | 1.82 | % | 1.80 | % | 1.79 | % | 1.79 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.82 | % | 1.82 | % | 1.81 | % | 1.79 | % | 1.79 | % | ||||||||||
Portfolio turnover rate | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 25,685 | $ | 31,793 | $ | 36,549 | $ | 47,779 | $ | 52,737 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 8.96 | $ | 8.10 | $ | 9.66 | $ | 10.03 | $ | 9.29 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.09 | ) | (0.08 | ) | (0.08 | ) | (0.10 | ) | (0.10 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.94 | 2.00 | (0.21 | ) | 0.79 | 1.34 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 0.85 | 1.92 | (0.29 | ) | 0.69 | 1.24 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 8.25 | $ | 8.96 | $ | 8.10 | $ | 9.66 | $ | 10.03 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 11.42 | % | 27.51 | % | (3.31 | %) | 7.35 | % | 13.96 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (1.05 | %) | (0.96 | %) | (0.94 | %) | (1.04 | %) | (1.02 | %) | ||||||||||
Net expenses (c) | 1.81 | % | 1.82 | % | 1.80 | % | 1.79 | % | 1.79 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 1.82 | % | 1.82 | % | 1.81 | % | 1.79 | % | 1.79 | % | ||||||||||
Portfolio turnover rate | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 197,231 | $ | 229,283 | $ | 306,409 | $ | 408,078 | $ | 402,714 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
16 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class I | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 11.06 | $ | 9.65 | $ | 11.15 | $ | 11.32 | $ | 10.31 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.00 | ‡ | 0.01 | 0.01 | 0.00 | ‡ | 0.00 | ‡ | ||||||||||||
Net realized and unrealized gain (loss) on investments | 1.20 | 2.46 | (0.24 | ) | 0.89 | 1.51 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.20 | 2.47 | (0.23 | ) | 0.89 | 1.51 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.01 | ) | — | — | — | — | ||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (1.57 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 10.69 | $ | 11.06 | $ | 9.65 | $ | 11.15 | $ | 11.32 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 12.54 | %(c) | 28.92 | % | (2.23 | %) | 8.36 | % | 15.26 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.04 | % | 0.12 | % | 0.12 | % | 0.02 | % | 0.02 | % | ||||||||||
Net expenses (d) | 0.72 | % | 0.75 | % | 0.74 | % | 0.74 | % | 0.74 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 0.73 | % | 0.75 | % | 0.75 | % | 0.74 | % | 0.74 | % | ||||||||||
Portfolio turnover rate | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 6,275,780 | $ | 6,752,754 | $ | 8,994,997 | $ | 12,150,253 | $ | 14,361,006 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Class R1 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.83 | $ | 9.48 | $ | 10.99 | $ | 11.17 | $ | 10.19 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.01 | ) | 0.00 | ‡ | 0.00 | ‡ | (0.01 | ) | (0.01 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 1.17 | 2.41 | (0.24 | ) | 0.89 | 1.49 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.16 | 2.41 | (0.24 | ) | 0.88 | 1.48 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 10.43 | $ | 10.83 | $ | 9.48 | $ | 10.99 | $ | 11.17 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 12.46 | % | 28.79 | % | (2.37 | %) | 8.39 | % | 15.14 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.06 | %) | 0.01 | % | 0.02 | % | (0.08 | %) | (0.08 | %) | ||||||||||
Net expenses (c) | 0.82 | % | 0.85 | % | 0.84 | % | 0.84 | % | 0.84 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 0.83 | % | 0.85 | % | 0.85 | % | 0.84 | % | 0.84 | % | ||||||||||
Portfolio turnover rate | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 1,102,423 | $ | 1,596,638 | $ | 1,636,560 | $ | 1,952,248 | $ | 2,225,940 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R1 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class R2 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 10.38 | $ | 9.15 | $ | 10.68 | $ | 10.92 | $ | 9.99 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.03 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.03 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 1.11 | 2.31 | (0.24 | ) | 0.85 | 1.46 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.08 | 2.29 | (0.26 | ) | 0.82 | 1.43 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.90 | $ | 10.38 | $ | 9.15 | $ | 10.68 | $ | 10.92 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 12.17 | %(c) | 28.49 | % | (2.66 | %) | 8.00 | % | 14.93 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.31 | %) | (0.24 | %) | (0.23 | %) | (0.32 | %) | (0.33 | %) | ||||||||||
Net expenses (d) | 1.07 | % | 1.10 | % | 1.09 | % | 1.09 | % | 1.09 | % | ||||||||||
Expenses (before waiver/reimbursement) (d) | 1.08 | % | 1.10 | % | 1.10 | % | 1.09 | % | 1.09 | % | ||||||||||
Portfolio turnover rate | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 227,298 | $ | 303,192 | $ | 391,535 | $ | 674,630 | $ | 984,295 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | Total investment return may reflect adjustments to conform to generally accepted accounting principles. |
(d) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
Year ended October 31, | ||||||||||||||||||||
Class R3 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 9.96 | $ | 8.85 | $ | 10.39 | $ | 10.67 | $ | 9.80 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.05 | ) | (0.04 | ) | (0.04 | ) | (0.06 | ) | (0.06 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 1.06 | 2.21 | (0.23 | ) | 0.84 | 1.43 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.01 | 2.17 | (0.27 | ) | 0.78 | 1.37 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 9.41 | $ | 9.96 | $ | 8.85 | $ | 10.39 | $ | 10.67 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 11.97 | % | 28.05 | % | (2.83 | %) | 7.79 | % | 14.59 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.55 | %) | (0.49 | %) | (0.48 | %) | (0.57 | %) | (0.57 | %) | ||||||||||
Net expenses (c) | 1.32 | % | 1.35 | % | 1.34 | % | 1.34 | % | 1.34 | % | ||||||||||
Expenses (before reimbursement/waiver) (c) | 1.33 | % | 1.35 | % | 1.35 | % | 1.34 | % | 1.34 | % | ||||||||||
Portfolio turnover rate | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 61,850 | $ | 78,634 | $ | 87,060 | $ | 114,118 | $ | 158,222 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
18 | MainStay Large Cap Growth Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class R6 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 11.12 | $ | 9.69 | $ | 11.18 | $ | 11.33 | $ | 10.31 | ||||||||||
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Net investment income (loss) (a) | 0.01 | 0.02 | 0.02 | 0.01 | 0.01 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.21 | 2.47 | (0.24 | ) | 0.90 | 1.51 | ||||||||||||||
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Total from investment operations | 1.22 | 2.49 | (0.22 | ) | 0.91 | 1.52 | ||||||||||||||
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Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.02 | ) | — | — | — | — | ||||||||||||||
From net realized gain on investments | (1.56 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
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Total dividends and distributions | (1.58 | ) | (1.06 | ) | (1.27 | ) | (1.06 | ) | (0.50 | ) | ||||||||||
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Net asset value at end of year | $ | 10.76 | $ | 11.12 | $ | 9.69 | $ | 11.18 | $ | 11.33 | ||||||||||
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Total investment return (b) | 12.72 | % | 29.02 | % | (2.12 | %) | 8.55 | % | 15.36 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.13 | % | 0.21 | % | 0.23 | % | 0.11 | % | 0.10 | % | ||||||||||
Net expenses (c) | 0.63 | % | 0.63 | % | 0.62 | % | 0.62 | % | 0.62 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 0.64 | % | 0.63 | % | 0.63 | % | 0.62 | % | 0.62 | % | ||||||||||
Portfolio turnover rate | 52 | % | 61 | % | 84 | % | 66 | % | 67 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 2,463,405 | $ | 2,122,217 | $ | 1,693,868 | $ | 1,311,034 | $ | 738,186 |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R6 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Note 1–Organization and Business
The MainStay Funds (the “Trust’’) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act’’), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds’’). These financial statements and notes relate to the MainStay Large Cap Growth Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has ten classes of shares registered for sale. Class A shares commenced operations on July 1, 1995. Class B, Class C, Class I, Class R1 and Class R2 shares commenced operations on April 1, 2005. Class R3 shares commenced operations on April 28, 2006. Investor Class shares commenced operations on February 28, 2008. Class R6 shares commenced operations on June 17, 2013. Class T shares were registered for sale effective as of February 28, 2017. As of October 31, 2018, Class T shares were not yet offered for sale. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge.
Class I, Class R1, Class R2, Class R3 and Class R6 shares are offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T, Class R2 and Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee. Class R1, Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seek long-term growth of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisor (as defined in Note 3(A)).
20 | MainStay Large Cap Growth Fund |
To assess the appropriateness of security valuations, the Manager, the Subadvisor or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Broker/dealer quotes | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • Reported trades |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisor, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades.
21 |
Notes to Financial Statements (continued)
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at
NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(D) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
(E) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may increase the costs of investing in mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(F) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(G) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisor to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisor will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the
22 | MainStay Large Cap Growth Fund |
collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of October 31, 2018, the Fund did not hold any repurchase agreements.
(H) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. As of October 31, 2018, the Fund did not have any portfolio securities on loan.
(I) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisor. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an
amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. Winslow Capital Management, LLC. (“Winslow” or the “Subadvisor’’), a registered investment adviser, serves as Subadvisor to the Fund and is responsible for the day-to-day portfolio management of the Fund. Pursuant to the terms of a Subadvisory Agreement (“Subadvisory Agreement”) between New York Life Investments and Winslow, New York Life Investments pays for the services of the Subadvisor.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s average daily net assets as follows: 0.75% up to $500 million; 0.725% from $500 million to $750 million; 0.71% from $750 million to $1 billion; 0.70% from $1 billion to $2 billion; 0.66% from $2 billion to $3 billion; 0.61% from $3 billion to $7 billion; 0.585% from $7 billion to $9 billion; and 0.575% in excess of $9 billion.
New York Life Investments has contractually agreed to waive a portion of its management fee so that the management fee does not exceed 0.55% of the Fund’s average daily net assets from $11 billion to $13 billion; and 0.525% of the Fund’s average daily net assets over $13 billion. This agreement will remain in effect until February 28, 2019 and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
New York Life Investments has also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase and sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class I shares do not exceed 0.88% of the Fund’s average daily net assets. New York Life Investments has also contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. These agreements will remain in effect until February 28, 2019, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
Additionally, New York Life Investments has agreed to further voluntarily waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase and sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R1 shares do not exceed 0.95% of its average daily net assets. This voluntary waiver or reimbursement may be discontinued at any time without notice.
During the year ended October 31, 2018, the effective management fee rate was 0.62%, exclusive of any applicable waivers/reimbursements.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $76,819,889 and waived its fees and/or reimbursed expenses in the amount of $374,784.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments.
23 |
Notes to Financial Statements (continued)
These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor’’), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans’’) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee.
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R1, Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R1, Class R2
and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the year ended October 31, 2018, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 1,490,942 | ||
Class R2 | 277,548 | |||
Class R3 | 69,135 |
(C) Sales Charges. During the year ended October 31, 2018, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $150,997 and $60,653, respectively.
During the year ended October 31, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class, Class B and Class C shares of $9,253, $7, $33,047 and $7,241, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 851,537 | ||
Investor Class | 204,448 | |||
Class B | 55,411 | |||
Class C | 402,001 | |||
Class I | 6,179,599 | |||
Class R1 | 1,343,601 | |||
Class R2 | 250,042 | |||
Class R3 | 62,209 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the year ended October 31, 2018, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Companies | Value, Beginning of Year | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Year | Dividend Income | Other Distributions | Shares End of Year | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | — | $ | 1,104,064 | $ | (904,612 | ) | $ | — | $ | — | $ | 199,452 | $ | 536 | $ | — | 199,452 | ||||||||||||||||||
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24 | MainStay Large Cap Growth Fund |
Note 4–Federal Income Tax
As of October 31, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized | |||||
Investments in Securities | $7,323,045,017 | $4,465,316,726 | $(121,398,146) | $4,343,918,580 |
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary Income | Accumulated Capital and Other Gain (Loss) | Other Temporary Differences | Unrealized Appreciation (Depreciation) | Total Accumulated Gain (Loss) | ||||
$18,818,280 | $1,949,656,916 | $— | $4,343,918,580 | $6,312,393,776 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily due to wash sale adjustments.
The following table discloses the current year reclassifications between total distributable earnings (loss) and additional paid-in capital arising from permanent differences; net assets as of October 31, 2018 were not affected.
Total Distributable Earnings (Loss) | Additional Paid-In Capital | |
$(312,214,840) | $312,214,840 |
The reclassifications for the Fund are primarily due to equalization.
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 205,327,756 | $ | — | ||||
Long-Term Capital Gain | 1,508,549,989 | 1,526,320,296 | ||||||
Total | $ | 1,713,877,745 | $ | 1,526,320,296 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to July 31, 2018, the aggregate commitment amount and the commitment fee were the same as those under the current Credit Agreement. During the year ended October 31, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow money for temporary purposes directly to or from one another subject to the conditions of the exemptive order. During the year ended October 31, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2018, purchases and sales of securities, other than short-term securities, were $6,404,250 and $8,511,554, respectively.
25 |
Notes to Financial Statements (continued)
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 42,230,349 | $ | 436,720,943 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 12,586,881 | 111,645,636 | ||||||
Shares redeemed | (33,979,838 | ) | (341,156,596 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 20,837,392 | 207,209,983 | ||||||
Shares converted into Class A (See Note 1) | 2,993,726 | 30,439,439 | ||||||
Shares converted from Class A (See Note 1) | (6,170,055 | ) | (60,392,537 | ) | ||||
|
| |||||||
Net increase (decrease) | 17,661,063 | $ | 177,256,885 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 15,446,601 | $ | 140,733,350 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 10,359,228 | 83,081,012 | ||||||
Shares redeemed | (36,765,480 | ) | (333,076,055 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (10,959,651 | ) | (109,261,693 | ) | ||||
Shares converted into Class A (See Note 1) | 7,863,468 | 78,150,962 | ||||||
Shares converted from Class A (See Note 1) | (882,285 | ) | (7,803,931 | ) | ||||
|
| |||||||
Net increase (decrease) | (3,978,468 | ) | $ | (38,914,662 | ) | |||
|
| |||||||
Investor Class | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 2,315,575 | $ | 23,413,077 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,870,663 | 16,368,293 | ||||||
Shares redeemed | (1,711,588 | ) | (16,884,001 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 2,474,650 | 22,897,369 | ||||||
Shares converted into Investor Class (See Note 1) | 383,765 | 3,862,501 | ||||||
Shares converted from Investor Class (See Note 1) | (2,753,111 | ) | (27,624,467 | ) | ||||
|
| |||||||
Net increase (decrease) | 105,304 | $ | (864,597 | ) | ||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,884,557 | $ | 17,119,999 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,417,746 | 19,196,902 | ||||||
Shares redeemed | (5,070,285 | ) | (45,794,027 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (767,982 | ) | (9,477,126 | ) | ||||
Shares converted into Investor Class (See Note 1) | 612,058 | 5,503,551 | ||||||
Shares converted from Investor Class (See Note 1) | (7,793,359 | ) | (76,793,949 | ) | ||||
|
| |||||||
Net increase (decrease) | (7,949,283 | ) | $ | (80,767,524 | ) | |||
|
| |||||||
Class B | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 241,914 | $ | 2,022,860 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 692,472 | 5,138,144 | ||||||
Shares redeemed | (791,214 | ) | (6,631,504 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 143,172 | 529,500 | ||||||
Shares converted from Class B (See Note 1) | (576,581 | ) | (4,863,880 | ) | ||||
|
| |||||||
Net increase (decrease) | (433,409 | ) | $ | (4,334,380 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 371,089 | $ | 2,812,224 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 610,879 | 4,251,717 | ||||||
Shares redeemed | (1,218,915 | ) | (9,643,234 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (236,947 | ) | (2,579,293 | ) | ||||
Shares converted from Class B (See Note 1) | (727,212 | ) | (5,746,670 | ) | ||||
|
| |||||||
Net increase (decrease) | (964,159 | ) | $ | (8,325,963 | ) | |||
|
| |||||||
Class C | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 3,673,084 | $ | 29,233,083 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,165,875 | 23,459,136 | ||||||
Shares redeemed | (8,509,547 | ) | (70,998,343 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,670,588 | ) | $ | (18,306,124 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 4,144,043 | $ | 30,206,204 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,605,366 | 18,107,292 | ||||||
Shares redeemed | (18,993,151 | ) | (148,598,246 | ) | ||||
|
| |||||||
Net increase (decrease) | (12,243,742 | ) | $ | (100,284,750 | ) | |||
|
| |||||||
26 | MainStay Large Cap Growth Fund |
Class I | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 112,191,066 | $ | 1,206,894,936 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 90,493,251 | 860,590,813 | ||||||
Shares redeemed | (223,290,202 | ) | (2,402,653,084 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (20,605,885 | ) | (335,167,335 | ) | ||||
Shares converted into Class I (See Note 1) | 5,585,360 | 58,612,453 | ||||||
Shares converted from Class I (See Note 1) | (8,691,745 | ) | (91,176,410 | ) | ||||
|
| |||||||
Net increase (decrease) | (23,712,270 | ) | $ | (367,731,292 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 144,324,904 | $ | 1,375,970,528 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 83,715,425 | 711,581,117 | ||||||
Shares redeemed | (548,671,760 | ) | (5,264,114,395 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (320,631,431 | ) | (3,176,562,750 | ) | ||||
Shares converted into Class I (See Note 1) | 723,030 | 6,750,849 | ||||||
Shares converted from Class I (See Note 1) | (1,561,675 | ) | (13,815,350 | ) | ||||
|
| |||||||
Net increase (decrease) | (321,470,076 | ) | $ | (3,183,627,251 | ) | |||
|
| |||||||
Class R1 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 17,515,552 | $ | 185,633,941 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 24,175,895 | 224,352,308 | ||||||
Shares redeemed | (83,439,927 | ) | (890,472,249 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (41,748,480 | ) | (480,486,000 | ) | ||||
Shares converted from Class R1 (See Note 1) | (3,154 | ) | (32,750 | ) | ||||
|
| |||||||
Net increase (decrease) | (41,751,634 | ) | $ | (480,518,750 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 16,132,262 | $ | 153,665,919 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 21,611,091 | 180,020,387 | ||||||
Shares redeemed | (62,925,774 | ) | (603,693,599 | ) | ||||
|
| |||||||
Net increase (decrease) | (25,182,421 | ) | $ | (270,007,293 | ) | |||
|
| |||||||
Class R2 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 6,634,712 | $ | 64,592,751 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,351,675 | 29,628,809 | ||||||
Shares redeemed | (16,238,968 | ) | (161,651,454 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (6,252,581 | ) | (67,429,894 | ) | ||||
Shares converted from Class R2 (See Note 1) | (69 | ) | (759 | ) | ||||
|
| |||||||
Net increase (decrease) | (6,252,650 | ) | $ | (67,430,653 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 7,846,870 | $ | 69,445,168 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 3,348,441 | 26,787,527 | ||||||
Shares redeemed | (24,664,053 | ) | (220,343,413 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | (13,468,742 | ) | (124,110,718 | ) | ||||
Shares converted from Class R2 (See Note 1) | (97,467 | ) | (792,409 | ) | ||||
|
| |||||||
Net increase (decrease) | (13,566,209 | ) | $ | (124,903,127 | ) | |||
|
| |||||||
Class R3 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 1,306,683 | $ | 12,397,991 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,273,708 | 10,711,886 | ||||||
Shares redeemed | (3,899,378 | ) | (36,048,817 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,318,987 | ) | $ | (12,938,940 | ) | |||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 1,561,683 | $ | 13,649,413 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,215,950 | 9,362,814 | ||||||
Shares redeemed | (4,725,243 | ) | (40,638,685 | ) | ||||
|
| |||||||
Net increase (decrease) | (1,947,610 | ) | $ | (17,626,458 | ) | |||
|
| |||||||
27 |
Notes to Financial Statements (continued)
Class R6 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 64,001,645 | $ | 692,272,013 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 29,936,782 | 286,195,637 | ||||||
Shares redeemed | (64,420,735 | ) | (690,023,758 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 29,517,692 | 288,443,892 | ||||||
Shares converted into Class R6 (See Note 1) | 8,642,314 | 91,176,410 | ||||||
|
| |||||||
Net increase (decrease) | 38,160,006 | $ | 379,620,302 | |||||
|
| |||||||
Year ended October 31, 2017: | ||||||||
Shares sold | 61,869,744 | $ | 595,622,627 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 20,979,877 | 179,168,150 | ||||||
Shares redeemed | (68,492,947 | ) | (677,970,870 | ) | ||||
|
| |||||||
Net increase (decrease) in shares outstanding before conversion | 14,356,674 | 96,819,907 | ||||||
Shares converted into Class R6 (See Note 1) | 1,638,521 | 14,546,947 | ||||||
|
| |||||||
Net increase (decrease) | 15,995,195 | $ | 111,366,854 | |||||
|
|
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
28 | MainStay Large Cap Growth Fund |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The MainStay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MainStay Large Cap Growth Fund (the Fund), one of the funds constituting The MainStay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians, the transfer agent, and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
29 |
Federal Income Tax Information
(Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders in a written statement as to the federal tax status of dividends paid by the Fund during such fiscal years. Accordingly, the Fund paid $1,508,549,989 as long term capital gain distributions.
For the fiscal year ended October 31, 2018, the Fund designated approximately $85,497,947 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2018 should be multiplied by the 70.08% to arrive at the amount eligible for the corporate dividend-received deduction.
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
30 | MainStay Large Cap Growth Fund |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
31 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
32 | MainStay Large Cap Growth Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
33 |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
* | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
34 | MainStay Large Cap Growth Fund |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1715995 MS293-18 | MSLG11-12/18 (NYLIM) NL221 |
MainStay MAP Equity Fund
Message from the President and Annual Report
October 31, 2018
Not FDIC/NCUA Insured | Not a Deposit | May Lose Value | No Bank Guarantee | Not Insured by Any Government Agency |
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Message from the President
U.S. stocks generally gained ground, while international stocks and most bonds trended lower during the 12-month period ended October 31, 2018.
Within the U.S. stock market, large-cap stocks tended to outperform their smaller-cap counterparts, while growth stocks outperformed value-oriented issues. Among large-cap industry sectors, consumer discretionary and health care led the market’s advance, followed by information technology and consumer staples. Basic materials underperformed broad market averages by the greatest margin, with industrials and financials lagging to a lesser degree. Communications services, real estate, energy and utilities ended the reporting period relatively flat.
Strong U.S. economic growth and rising levels of corporate earnings supported the stock market’s gains throughout the reporting period. U.S. gross domestic product (GDP), a measure of economic growth, expanded at its fastest rate since 2000 during the reporting period, while wages surged and unemployment dipped to levels not seen in 49 years. U.S. corporate sales and earnings also significantly exceeded expectations, supported, in part, by a business-friendly tax bill signed into law on December 22, 2017. According to FactSet, a financial data and analytics provider, in the third quarter of 2018, 78% of S&P 500® companies reported a positive earnings-per-share (EPS) surprise, while 61% reported a positive sales surprise.
Economic growth in the rest of the world proved more moderate. Despite gradual improvements since the 2007 financial crisis, much of the developed world outside of the United States continued to exhibit relatively modest GDP growth rates and high levels of unemployment. International stock markets were further undermined by increasingly protectionist U.S. trade policies. European Union and Japanese attempts to negotiate settlements of their trade conflicts with the United States achieved only limited success, while tensions between the United States and China escalated toward an all-out trade war, with each country imposing significant tariffs on a widening range of the other’s goods. In this environment, most international stocks ended the reporting period with significant losses. Emerging-market stocks were hit especially hard by trade uncertainties and the rising value of the U.S. dollar.
Domestic and international bonds suffered in an environment of rising interest rates and increasing inflationary pressures. In contrast to central banks in many other developed nations, which maintained low interest rates and accommodative fiscal policies, the U.S. Federal Reserve (the Fed) raised the
benchmark federal funds rate 25 basis points (0.25%) four times during the reporting period, gradually increasing the rate from 1.25% at the beginning of the reporting period to 2.25% in September 2018. Shortly after its September rate hike, the Fed signaled that additional increases were likely, and might rise above the so-called normalized levels previously expected. The Fed’s aggressive stance drove bonds lower in the final month of the reporting period. All types and durations of bonds suffered in this environment, with longer-term instruments tending to underperform shorter-term ones, and with all grades of corporate bonds underperforming more conservative government bonds. While municipal bonds produced mildly negative returns as well, most outperformed their taxable government and corporate counterparts.
October 2018 proved volatile for equities as well, with several broad U.S. market indices retreating sharply from record levels set the previous month. Several factors contributed to market volatility, among them mounting trade tensions between the United States and China, the potential for rising inflation, an increase in disappointing corporate earnings forecasts, signs of faltering global economic growth and concerns that the U.S. economy might slow significantly in 2019.
High levels of market volatility are generally regarded as a sign of investor uncertainty. As a MainStay investor, you can rely on the discipline and dedication of our portfolio managers as they pursue the objectives of their individual Funds using the investment strategies and processes outlined in the prospectus. Our market experience and professional insight free you to focus on your long-term investment goals, while we work to maximize your returns and manage the continually changing risks associated with your investments.
The report that follows contains additional information on the market events, investment decisions and specific securities that shaped your Fund’s performance during the 12 months ended October 31, 2018. We encourage you to read the report carefully and use it to evaluate your Fund’s performance in light of your long-range financial plan.
Sincerely,
Kirk C. Lehneis
President
The opinions expressed are as of the date of this report and are subject to change. There is no guarantee that any forecast made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Past performance is no guarantee of future results.
Not part of the Annual Report
Investors should refer to the Fund’s Summary Prospectus and/or Prospectus and consider the Fund’s investment objectives, strategies, risks, charges and expenses carefully before investing. The Summary Prospectus and/or Prospectus contain this and other information about the Fund. You may obtain copies of the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information free of charge, upon request, by calling toll-free 800-MAINSTAY (624-6782), by writing to NYLIFE Distributors LLC, Attn: MainStay Marketing Department, 30 Hudson Street, Jersey City, NJ 07302 or by sending an e-mail to MainStayShareholderServices@nylim.com. These documents are also available via the MainStay Funds’ website at nylinvestments.com/funds. Please read the Summary Prospectus and/or Prospectus carefully before investing.
Investment and Performance Comparison1 (Unaudited)
Performance data quoted represents past performance. Past performance is no guarantee of future results. Because of market volatility and other factors, current performance may be lower or higher than the figures shown. Investment return and principal value will fluctuate, and as a result, when shares are redeemed, they may be worth more or less than their original cost. The graph below depicts the historical performance of Class I shares of the Fund. Performance will vary from class to class based on differences in class-specific expenses and sales charges. For performance information current to the most recent month-end, please call 800-MAINSTAY (624-6782) or visit nylinvestments.com/funds.
Average Annual Total Returns for the Year-Ended October 31, 2018
Class | Sales Charge | Inception Date | One Year | Five Years | Ten Years | Gross Expense Ratio2 | ||||||||||||||||||
Class A Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | 6/9/1999 | | | –0.89 4.88 | %
| | 6.90 8.11 | %
| | 10.73 11.36 | %
| | 1.10 1.10 | %
| |||||||
Investor Class Shares | Maximum 5.5% Initial Sales Charge | With sales charges Excluding sales charges | | 2/28/2008 | | | –1.06 4.69 |
| | 6.71 7.92 |
| | 10.51 11.14 |
| | 1.29 1.29 |
| |||||||
Class B Shares3 | Maximum 5% CDSC if Redeemed Within the First Six Years of Purchase | With sales charges Excluding sales charges | 6/9/1999 | | –0.72 3.91 |
| | 6.84 7.11 |
| | 10.31 10.31 |
| | 2.05 2.05 |
| |||||||||
Class C Shares | Maximum 1% CDSC if Redeemed Within One Year of Purchase | With sales charges Excluding sales charges | | 6/9/1999 | | | 2.98 3.91 |
| | 7.11 7.11 |
| | 10.31 10.31 |
| | 2.05 2.05 |
| |||||||
Class I Shares | No Sales Charge | 1/21/1971 | 5.17 | 8.38 | 11.63 | 0.85 | ||||||||||||||||||
Class R1 Shares | No Sales Charge | 1/2/2004 | 5.05 | 8.27 | 11.51 | 0.95 | ||||||||||||||||||
Class R2 Shares | No Sales Charge | 1/2/2004 | 4.77 | 8.00 | 11.23 | 1.20 | ||||||||||||||||||
Class R3 Shares | No Sales Charge | 4/28/2006 | 4.51 | 7.74 | 10.96 | 1.45 |
1. | The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or Fund share redemptions. Total returns reflect maximum applicable sales charges as indicated in the table above, if any, changes in share price, and reinvestment of dividend and capital gain distributions. The graph assumes the initial investment amount shown above and reflects the deduction of all sales charges that would have applied for the period of investment. Performance figures may reflect certain fee waivers and/or expense limitations, without which total returns may have |
been lower. For more information on share classes and current fee waivers and/or expense limitations, if any, please refer to the Notes to Financial Statements. |
2. | The gross expense ratios presented reflect the Fund’s “Total Annual Fund Operating Expenses” from the most recent Prospectus and may differ from other expense ratios disclosed in this report. |
3. | Class B shares are closed to all new purchases as well as additional investments by existing Class B shareholders. |
The footnotes on the next page are an integral part of the table and graph and should be carefully read in conjunction with them.
5 |
Benchmark Performance | One Year | Five Years | Ten Years | |||||||||
Russell 3000® Index4 | 6.60 | % | 10.81 | % | 13.35 | % | ||||||
S&P 500® Index5 | 7.35 | 11.34 | 13.24 | |||||||||
Morningstar Large Blend Category Average6 | 5.28 | 9.44 | 12.14 |
4. | The Russell 3000® Index is the Fund’s primary broad-based securities market index for comparison purposes. The Russell 3000® Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
5. | The S&P 500® Index is the Fund’s secondary benchmark. “S&P 500®” is a trademark of The McGraw-Hill Companies, Inc. The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance. Results assume reinvestment of all dividends and capital gains. An investment cannot be made directly in an index. |
6. | The Morningstar Large Blend Category Average is representative of funds that represent the overall US stock market in size, growth rates and price. Stocks in the top 70% of the capitalization of the US equity market are defined as large cap. The blend style is assigned to portfolios where neither growth nor value characteristics predominate. These portfolios tend to invest across the spectrum of US industries, and owing to their broad exposure, the portfolios’ returns are often similar to those of the S&P 500 Index. Results are based on average total returns of similar funds with all dividends and capital gain distributions reinvested. |
The footnotes on the preceding page are an integral part of the table and graph and should be carefully read in conjunction with them.
6 | MainStay MAP Equity Fund |
Cost in Dollars of a $1,000 Investment in MainStay MAP Equity Fund (Unaudited)
The example below is intended to describe the fees and expenses borne by shareholders during the six-month period from May 1, 2018, to October 31, 2018, and the impact of those costs on your investment.
Example
As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including exchange fees and sales charges (loads) on purchases (as applicable), and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses (as applicable). This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 made at the beginning of the six-month period and held for the entire period from May 1, 2018, to October 31, 2018.
This example illustrates your Fund’s ongoing costs in two ways:
Actual Expenses
The second and third data columns in the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid during the six months ended October 31, 2018. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The fourth and fifth data columns in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the six-month period shown. You may use this information to compare the ongoing costs of investing in the Fund with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as exchange fees or sales charges (loads). Therefore, the fourth and fifth data columns of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 5/1/18 | Ending Account Value (Based on Actual Returns and Expenses) 10/31/18 | Expenses Paid During Period1 | Ending Account Value (Based on Hypothetical 5% Annualized Return and Actual Expenses) 10/31/18 | Expenses Paid During Period1 | Net Expense Ratio During Period2 | ||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,027.20 | $ | 5.62 | $ | 1,019.66 | $ | 5.60 | 1.10% | |||||||||||
Investor Class Shares | $ | 1,000.00 | $ | 1,026.40 | $ | 6.59 | $ | 1,018.70 | $ | 6.56 | 1.29% | |||||||||||
Class B Shares | $ | 1,000.00 | $ | 1,022.40 | $ | 10.40 | $ | 1,014.92 | $ | 10.36 | 2.04% | |||||||||||
Class C Shares | $ | 1,000.00 | $ | 1,022.40 | $ | 10.40 | $ | 1,014.92 | $ | 10.36 | 2.04% | |||||||||||
Class I Shares | $ | 1,000.00 | $ | 1,028.80 | $ | 4.35 | $ | 1,020.92 | $ | 4.33 | 0.85% | |||||||||||
Class R1 Shares | $ | 1,000.00 | $ | 1,028.00 | $ | 4.80 | $ | 1,020.52 | $ | 4.79 | 0.94% | |||||||||||
Class R2 Shares | $ | 1,000.00 | $ | 1,026.50 | $ | 6.13 | $ | 1,019.16 | $ | 6.11 | 1.20% | |||||||||||
Class R3 Shares | $ | 1,000.00 | $ | 1,025.40 | $ | 7.40 | $ | 1,017.90 | $ | 7.38 | 1.45% |
1. | Expenses are equal to the Fund’s annualized expense ratio of each class multiplied by the average account value over the period, divided by 365 and multiplied by 184 (to reflect the six-month period). The table above represents the actual expenses incurred during the six-month period. In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above-reported expense figures. |
2. | Expenses are equal to the Fund’s annualized expense ratio to reflect the six-month period. |
7 |
Industry Composition as of October 31, 2018 (Unaudited)
Technology Hardware, Storage & Peripherals | 7.5 | % | ||
Health Care Providers & Services | 6.6 | |||
Software | 6.6 | |||
Aerospace & Defense | 6.5 | |||
Banks | 5.9 | |||
Insurance | 4.7 | |||
Media | 4.7 | |||
Interactive Media & Services | 4.6 | |||
Oil, Gas & Consumable Fuels | 4.0 | |||
Pharmaceuticals | 3.8 | |||
IT Services | 3.7 | |||
Entertainment | 3.5 | |||
Capital Markets | 3.3 | |||
Specialty Retail | 3.0 | |||
Health Care Equipment & Supplies | 2.9 | |||
Chemicals | 2.4 | |||
Semiconductors & Semiconductor Equipment | 2.4 | |||
Road & Rail | 2.3 | |||
Consumer Finance | 1.8 | |||
Food & Staples Retailing | 1.7 | |||
Hotels, Restaurants & Leisure | 1.7 | |||
Internet & Direct Marketing Retail | 1.4 | |||
Beverages | 1.3 | |||
Biotechnology | 1.1 |
Diversified Financial Services | 1.1 | % | ||
Diversified Telecommunication Services | 0.9 | |||
Electrical Equipment | 0.9 | |||
Machinery | 0.9 | |||
Electronic Equipment, Instruments & Components | 0.8 | |||
Construction & Engineering | 0.7 | |||
Industrial Conglomerates | 0.7 | |||
Multiline Retail | 0.7 | |||
Construction Materials | 0.5 | |||
Tobacco | 0.5 | |||
Building Products | 0.4 | |||
Household Durables | 0.4 | |||
Multi-Utilities | 0.4 | |||
Air Freight & Logistics | 0.3 | |||
Containers & Packaging | 0.3 | |||
Energy Equipment & Services | 0.3 | |||
Household Products | 0.3 | |||
Metals & Mining | 0.3 | |||
Textiles, Apparel & Luxury Goods | 0.3 | |||
Food Products | 0.2 | |||
Auto Components | 0.0 | ‡ | ||
Short-Term Investment | 1.4 | |||
Other Assets, Less Liabilities | 0.3 | |||
|
| |||
100.0 | % | |||
|
|
See Portfolio of Investments beginning on page 12 for specific holdings within these categories. The Fund’s portfolio is subject to change.
‡ | Less than one-tenth of a percent. |
Top Ten Holdings as of October 31, 2018 (excluding short-term investment) (Unaudited)
1. | Apple, Inc. |
2. | Microsoft Corp. |
3. | Alphabet, Inc. |
4. | Boeing Co. |
5. | Aetna, Inc. |
6. | Bank of America Corp. |
7. | Liberty SiriusXM Group |
8. | PayPal Holdings, Inc. |
9. | DowDuPont, Inc. |
10. | Union Pacific Corp. |
8 | MainStay MAP Equity Fund |
Portfolio Management Discussion and Analysis (Unaudited)
Questions answered by portfolio managers Christopher Mullarkey and James Mulvey of Markston International LLC (“Markston”), a Subadvisor to the Fund; and portfolio managers William W. Priest, CFA, Michael A. Welhoelter, CFA, and David N. Pearl of Epoch Investment Partners, Inc. (“Epoch”), a Subadvisor to the Fund.
How did MainStay MAP Equity Fund perform relative to its benchmarks and peer group during the 12 months ended October 31, 2018?
For the 12 months ended October 31, 2018, Class I shares of MainStay MAP Equity Fund returned 5.17%, underperforming the 6.60% return of the Fund’s primary benchmark, the Russell 3000® Index. Over the same period, Class I shares underperformed the 7.35% return of the S&P 500® Index, which is the Fund’s secondary benchmark, and the 5.28% return of the Morningstar Large Blend Category Average.1
What factors affected the Fund’s relative performance during the reporting period?
Markston
During the reporting period, stock selection largely within the industrials and information technology sectors helped the Markston portion of the Fund outperform relative to the Russell 3000® Index.
Epoch
In the Epoch portion of the Fund, security selection had a positive impact on relative performance in the energy, health care and industrials sectors, but security selection in other sectors more than offset that advantage. Certain holdings within the consumer discretionary, financials and information technology sectors, among others, detracted from relative performance in the Epoch portion of the Fund. Nine of eleven sectors posted positive returns for the reporting period. Against this backdrop, the Epoch portion of the Fund held overweight positions in financials, industrials and materials that also detracted from relative performance.
During the reporting period, which sectors were the strongest positive contributors to the Fund’s relative performance and which sectors were particularly weak?
Markston
During the reporting period, the strongest positive sector contributors to relative performance in the Markston portion of the Fund were industrials, information technology and communication services. (Contributions take weightings and total returns into account.) The weakest sectors were financials, consumer discretionary and health care.
Epoch
In the Epoch portion of the Fund, health care, industrials and real estate provided the strongest positive contributions to
relative performance during the reporting period. Over the same period, consumer discretionary, financials and information technology detracted from relative performance in the Epoch portion of the Fund.
During the reporting period, which individual stocks made the strongest positive contributions to the Fund’s absolute performance and which stocks detracted the most?
Markston
The stocks that made the strongest contributions to absolute performance in the Markston portion of the Fund were aerospace & defense company Boeing; technology hardware, storage & peripherals company Apple; and media company Twenty-First Century Fox. Boeing and Apple both appreciated because of their large cash-generation capabilities. Twenty-First Century Fox appreciated because it was in a bidding war with The Walt Disney Company and Comcast. The stocks that detracted the most from absolute performance in the Markston portion of the Fund were capital markets company State Street and insurance company American International Group (AIG). During the reporting period, the Markston portion of the Fund slightly reduced its position in State Street and added to its position in AIG.
Epoch
In the Epoch portion of the Fund, technology hardware, storage & peripherals company Apple and software company Microsoft provided the strongest positive contributions to absolute performance. Apple’s stock continued to appreciate on higher-than-expected cash flow generation and, in our view, prospects for a significant return of capital to shareholders. The company is in the process of a large share buyback using excess cash. We believe that Apple will continue to grow free cash flow per share at a meaningful rate, and in our opinion, the current valuation is attractive. Microsoft shares continued to perform well on increasing revenue, profits and cash flow. Microsoft is successfully transitioning to the cloud and is using Office 365 to generate recurring revenue. We believe that the cloud opportunity is vast and that Microsoft is investing appropriately to capture its fair share of this growth. Although the cloud business has depressed near-term profitability, profit margins are improving as the business scales, and we believe that they should normalize in a few years. We believe that these factors could drive strong revenue and free cash flow growth at Microsoft for many years.
1. | See page 5 for other share class returns, which may be higher or lower than Class I share returns. See page 6 for more information on benchmark and peer group returns. |
9 |
The most significant detractors from absolute performance in the Epoch portion of the Fund during the reporting period were semiconductor company Applied Materials and electronic equipment, instruments & components company Coherent. Despite reporting third-quarter revenue and profits that exceeded consensus expectations, shares of Applied Materials continued to decline on market concerns that semiconductor capital equipment spending had peaked in the current cycle. Despite this, we believe that spending on semiconductor equipment remains healthy, and in our opinion, the company’s revenue could grow by double digits in fiscal year 2018. In information technology, shares of Coherent declined. Although the company reported strong results, the stock fell because of concerns about slowing adoption of organic light emitting diode (OLED) phones driven by lower-than-expected sales of the iPhone X. We believe that OLED adoption is likely to continue to increase over time, driving strong free cash flow growth at Coherent.
What were some of the Fund’s largest purchases and sales during the reporting period?
Markston
The largest purchases in the Markston portion of the Fund during the reporting period were in Chinese Internet services company Tencent Holdings, Ltd., ADR and U.S.-domiciled insurance company AIG. The Markston portion of the Fund initially purchased Tencent Holdings after the stock fell because of news that its largest holder was reducing its position in the company, even as the stock exhibited some of our “Alpha Generators” such as insider buying, spin-offs and operating in a consolidating industry. The Markston portion of the Fund added to its existing position in AIG because the discount to book value widened and the stock exhibited some of our “Alpha Generators” such as new management, insider buying, the sale of a division and stock repurchase. During the reporting period, the largest sales in the Markston portion of the Fund were technology hardware, storage & peripherals company Apple and equity real estate investment trust (REIT) UDR, Inc. The Markston portion of the Fund took profits in both stocks to meet Fund redemptions.
Epoch
During the reporting period, new purchases in the Epoch portion of the Fund included health care equipment & supplies company Boston Scientific and software-as-a service company LogMeIn. Boston Scientific’s business emphasizes cardiovascular products and cardiac rhythm management. The company markets its products in about 120 countries. While the United States is still Boston Scientific’s largest single market, international sales have grown to make up about 45% of total sales. Going
forward, we believe that accelerating top-line revenue from new product launches and international expansion could drive free cash flow growth by mid–single digits over the next three years. LogMeIn provides software-as-a-service for collaboration (web conferencing, unified communications and training), access and identity management (remote access and password keeping) and customer service (assistance, rescue and chat). Recent execution issues after a large deal caused the company to miss expectations for billings growth. In the meantime, the company aggressively bought back stock and paid a growing dividend. In our opinion, revenue growth should continue, which could combine with margin expansion and share repurchases to help provide strong free cash flow per share growth going forward.
Among the largest sales in the Epoch portion of the Fund during the reporting period were banking company Citizens Financial Group and media company Comcast. Citizens Financial approached its preestablished price target as management executed well on the company’s growth strategy. Management was able to maintain a robust balance sheet while expanding Citizens Financial Group’s interest and fee income through a variety of initiatives. Comcast’s renewed offer to acquire select entertainment, cable and broadcast assets of Twenty-First Century Fox increased the risk of a bidding war between Comcast and The Walt Disney Company. In our opinion, Comcast’s aggressive counterbid and all-cash offer increased the likelihood that the company could overpay and increase financial leverage, which we believed could lower returns for shareholders in the future. For these reasons, the Epoch portion of the Fund opted to sell its entire position in Comcast.
How did the Fund’s sector weightings change during the reporting period?
Markston
During the reporting period, a new Global Industry Classification Standard (GICS®)2 sector was introduced at the end of the third quarter of 2018. As a result, the weighting in the Markston portion of the Fund in the communication services sector increased while the weighting in the consumer discretionary sector decreased. Outside of this change, the Markston portion of the Fund reduced its weighting in the real estate sector to zero.
Epoch
During the reporting period, the most significant sector weighting increases in the Epoch portion of the Fund were in health care, materials and energy. Over the same period, the Epoch portion of the Fund reduced its sector weightings in financials, information technology and consumer staples.
2. | GICS® is an equity classification standard jointly developed by Morgan Stanley Capital International and Standard & Poor’s. |
10 | MainStay MAP Equity Fund |
How was the Fund positioned at the end of the reporting period?
Markston
As of October 31, 2018, the Markston portion of the Fund held an overweight position relative to the Russell 3000® Index in the communication services sector, primarily because of the introduction of a new GICS® sector during the reporting period. As of the same date, the Markston portion of the Fund also held overweight sector positions in financials and industrials. As of
October 31, 2018, the Markston portion of the Fund held an underweight position relative to the benchmark in the consumer discretionary sector, also as a result of the new GICS® sector.
As of the same date, the Markston portion of the Fund held underweight positions relative to the Russell 3000® Index in the real estate and utilities sectors.
Epoch
As of October 31, 2018, the most significantly overweight sector positions relative to the Russell 3000® Index in the Epoch portion of the Fund were in information technology and materials. As of the same date, the most significantly underweight positions relative to the benchmark in the Epoch portion of the Fund were in consumer staples and real estate.
The opinions expressed are those of the portfolio managers as of the date of this report and are subject to change. There is no guarantee that any forecasts will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment.
11 |
Portfolio of Investments October 31, 2018
Shares | Value | |||||||
Common Stocks 98.3%† |
| |||||||
Aerospace & Defense 6.5% |
| |||||||
Boeing Co. | 112,749 | $ | 40,010,110 | |||||
Hexcel Corp. | 96,527 | 5,648,760 | ||||||
Raytheon Co. | 91,277 | 15,977,126 | ||||||
United Technologies Corp. | 49,970 | 6,206,774 | ||||||
|
| |||||||
67,842,770 | ||||||||
|
| |||||||
Air Freight & Logistics 0.3% |
| |||||||
XPO Logistics, Inc. (a) | 35,611 | 3,182,911 | ||||||
|
| |||||||
Auto Components 0.0%‡ |
| |||||||
Garrett Motion, Inc. (a) | 3,679 | 55,811 | ||||||
|
| |||||||
Banks 5.9% |
| |||||||
Bank of America Corp. | 943,177 | 25,937,367 | ||||||
Bank OZK | 127,612 | 3,491,464 | ||||||
Citigroup, Inc. | 90,922 | 5,951,754 | ||||||
JPMorgan Chase & Co. | 110,729 | 12,071,676 | ||||||
U.S. Bancorp | 119,676 | 6,255,465 | ||||||
Wells Fargo & Co. | 147,319 | 7,841,790 | ||||||
|
| |||||||
61,549,516 | ||||||||
|
| |||||||
Beverages 1.3% |
| |||||||
Coca-Cola Co. | 72,640 | 3,478,003 | ||||||
PepsiCo., Inc. | 88,500 | 9,945,630 | ||||||
|
| |||||||
13,423,633 | ||||||||
|
| |||||||
Biotechnology 1.1% |
| |||||||
AbbVie, Inc. | 96,193 | 7,488,625 | ||||||
Celgene Corp. (a) | 50,375 | 3,606,850 | ||||||
|
| |||||||
11,095,475 | ||||||||
|
| |||||||
Building Products 0.4% |
| |||||||
Fortune Brands Home & Security, Inc. | 69,865 | 3,117,119 | ||||||
Johnson Controls International PLC | 28,811 | 910,442 | ||||||
Resideo Technologies, Inc. (a) | 8,983 | 182,065 | ||||||
|
| |||||||
4,209,626 | ||||||||
|
| |||||||
Capital Markets 3.3% |
| |||||||
Ameriprise Financial, Inc. | 27,104 | 3,448,713 | ||||||
Bank of New York Mellon Corp. | 68,870 | 3,259,617 | ||||||
Goldman Sachs Group, Inc. | 31,589 | 7,119,213 | ||||||
Morgan Stanley | 280,923 | 12,826,944 | ||||||
State Street Corp. | 117,436 | 8,073,725 | ||||||
|
| |||||||
34,728,212 | ||||||||
|
| |||||||
Chemicals 2.4% |
| |||||||
DowDuPont, Inc. | 326,893 | 17,626,071 | ||||||
Ecolab, Inc. | 28,467 | 4,359,721 | ||||||
Linde PLC | 20,088 | 3,323,961 | ||||||
|
| |||||||
25,309,753 | ||||||||
|
|
Shares | Value | |||||||
Construction & Engineering 0.7% |
| |||||||
Jacobs Engineering Group, Inc. | 102,838 | $ | 7,722,106 | |||||
|
| |||||||
Construction Materials 0.5% |
| |||||||
Martin Marietta Materials, Inc. | 29,012 | 4,969,175 | ||||||
|
| |||||||
Consumer Finance 1.8% |
| |||||||
American Express Co. | 121,362 | 12,467,518 | ||||||
Discover Financial Services | 89,542 | 6,238,391 | ||||||
|
| |||||||
18,705,909 | ||||||||
|
| |||||||
Containers & Packaging 0.3% |
| |||||||
Berry Global Group, Inc. (a) | 69,641 | 3,037,741 | ||||||
|
| |||||||
Diversified Financial Services 1.1% |
| |||||||
AXA Equitable Holdings, Inc. | 295,526 | 5,996,223 | ||||||
Berkshire Hathaway, Inc., Class B (a) | 28,234 | 5,795,875 | ||||||
|
| |||||||
11,792,098 | ||||||||
|
| |||||||
Diversified Telecommunication Services 0.9% |
| |||||||
AT&T, Inc. | 310,750 | 9,533,810 | ||||||
|
| |||||||
Electrical Equipment 0.9% |
| |||||||
AMETEK, Inc. | 61,352 | 4,115,492 | ||||||
Rockwell Automation, Inc. | 29,700 | 4,892,481 | ||||||
|
| |||||||
9,007,973 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components 0.8% |
| |||||||
Coherent, Inc. (a) | 26,067 | 3,209,890 | ||||||
TE Connectivity, Ltd. | 67,004 | 5,053,442 | ||||||
|
| |||||||
8,263,332 | ||||||||
|
| |||||||
Energy Equipment & Services 0.3% |
| |||||||
Schlumberger, Ltd. | 64,012 | 3,284,456 | ||||||
|
| |||||||
Entertainment 3.5% |
| |||||||
Liberty Media Corp-Liberty Formula One, Class C (a) | 62,900 | 2,080,732 | ||||||
Lions Gate Entertainment Corp., Class B | 49,448 | 879,680 | ||||||
Madison Square Garden Co., Class A (a) | 39,530 | 10,934,789 | ||||||
Twenty-First Century Fox, Inc., Class A | 337,299 | 15,353,850 | ||||||
Walt Disney Co. | 63,076 | 7,243,017 | ||||||
|
| |||||||
36,492,068 | ||||||||
|
| |||||||
Food & Staples Retailing 1.7% |
| |||||||
Costco Wholesale Corp. | 34,193 | 7,817,545 | ||||||
Walgreens Boots Alliance, Inc. | 128,449 | 10,246,377 | ||||||
|
| |||||||
18,063,922 | ||||||||
|
| |||||||
Food Products 0.2% |
| |||||||
Mondelez International, Inc., Class A | 60,366 | 2,534,165 | ||||||
|
|
12 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Shares | Value | |||||||
Common Stocks (continued) |
| |||||||
Health Care Equipment & Supplies 2.9% |
| |||||||
Abbott Laboratories | 64,342 | $ | 4,435,738 | |||||
Boston Scientific Corp. (a) | 169,931 | 6,141,306 | ||||||
Danaher Corp. | 52,026 | 5,171,384 | ||||||
Medtronic PLC | 156,267 | 14,035,902 | ||||||
|
| |||||||
29,784,330 | ||||||||
|
| |||||||
Health Care Providers & Services 6.6% |
| |||||||
Aetna, Inc. | 140,126 | 27,800,998 | ||||||
Centene Corp. (a) | 62,061 | 8,087,790 | ||||||
CVS Health Corp. | 221,430 | 16,029,318 | ||||||
UnitedHealth Group, Inc. | 42,428 | 11,088,558 | ||||||
Universal Health Services, Inc., Class B | 50,008 | 6,078,972 | ||||||
|
| |||||||
69,085,636 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure 1.7% |
| |||||||
Marriott International, Inc., Class A | 27,925 | 3,264,153 | ||||||
McDonald’s Corp. | 25,651 | 4,537,662 | ||||||
MGM Resorts International | 167,859 | 4,478,478 | ||||||
Starbucks Corp. | 88,510 | 5,157,478 | ||||||
|
| |||||||
17,437,771 | ||||||||
|
| |||||||
Household Durables 0.4% |
| |||||||
LGI Homes, Inc. (a) | 90,419 | 3,869,029 | ||||||
|
| |||||||
Household Products 0.3% |
| |||||||
Procter & Gamble Co. | 33,856 | 3,002,350 | ||||||
|
| |||||||
Industrial Conglomerates 0.7% |
| |||||||
Honeywell International, Inc. | 51,895 | 7,515,434 | ||||||
|
| |||||||
Insurance 4.7% |
| |||||||
American International Group, Inc. | 245,661 | 10,143,343 | ||||||
Chubb, Ltd. | 62,584 | 7,817,367 | ||||||
Everest Re Group, Ltd. | 7,825 | 1,704,754 | ||||||
MetLife, Inc. | 223,252 | 9,195,750 | ||||||
Travelers Cos., Inc. | 95,551 | 11,956,297 | ||||||
W.R. Berkley Corp. | 57,404 | 4,356,964 | ||||||
Willis Towers Watson PLC | 23,668 | 3,388,311 | ||||||
|
| |||||||
48,562,786 | ||||||||
|
| |||||||
Interactive Media & Services 4.6% |
| |||||||
Alphabet, Inc. (a) | ||||||||
Class A | 10,175 | 11,096,651 | ||||||
Class C | 29,401 | 31,658,115 | ||||||
Facebook, Inc., Class A (a) | 25,500 | 3,870,645 | ||||||
Tencent Holdings, Ltd., ADR | 45,900 | 1,575,747 | ||||||
|
| |||||||
48,201,158 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail 1.4% |
| |||||||
Alibaba Group Holding, Ltd., Sponsored ADR (a) | 9,375 | 1,333,875 |
Shares | Value | |||||||
Internet & Direct Marketing Retail (continued) |
| |||||||
Booking Holdings, Inc. (a) | 1,690 | $ | 3,168,040 | |||||
Ctrip.com International, Ltd., ADR (a) | 39,736 | 1,322,414 | ||||||
eBay, Inc. (a) | 122,129 | 3,545,405 | ||||||
Qurate Retail, Inc. (a) | 242,085 | 5,311,345 | ||||||
|
| |||||||
14,681,079 | ||||||||
|
| |||||||
IT Services 3.7% |
| |||||||
Automatic Data Processing, Inc. | 28,000 | 4,034,240 | ||||||
PayPal Holdings, Inc. (a) | 224,307 | 18,884,407 | ||||||
VeriSign, Inc. (a) | 13,400 | 1,910,036 | ||||||
Visa, Inc., Class A | 98,198 | 13,536,594 | ||||||
|
| |||||||
38,365,277 | ||||||||
|
| |||||||
Machinery 0.9% |
| |||||||
Caterpillar, Inc. | 18,650 | 2,262,618 | ||||||
Ingersoll-Rand PLC | 70,132 | 6,728,464 | ||||||
|
| |||||||
8,991,082 | ||||||||
|
| |||||||
Media 4.7% |
| |||||||
Comcast Corp., Class A | 350,761 | 13,378,025 | ||||||
GCI Liberty, Inc., Class A (a) | 27,252 | 1,289,837 | ||||||
Liberty Broadband Corp. (a) |
| |||||||
Class A | 17,897 | 1,481,693 | ||||||
Class C | 109,073 | 9,045,424 | ||||||
Liberty SiriusXM Group (a) | ||||||||
Class A | 172,213 | 7,102,064 | ||||||
Class C | 377,416 | 15,575,958 | ||||||
MSG Networks, Inc., Class A (a) | 39,924 | 1,020,058 | ||||||
|
| |||||||
48,893,059 | ||||||||
|
| |||||||
Metals & Mining 0.3% |
| |||||||
Reliance Steel & Aluminum Co. | 41,119 | 3,245,112 | ||||||
|
| |||||||
Multi-Utilities 0.4% |
| |||||||
WEC Energy Group, Inc. | 53,826 | 3,681,698 | ||||||
|
| |||||||
Multiline Retail 0.7% |
| |||||||
Dollar General Corp. | 66,369 | 7,392,179 | ||||||
|
| |||||||
Oil, Gas & Consumable Fuels 4.0% |
| |||||||
Anadarko Petroleum Corp. | 116,390 | 6,191,948 | ||||||
ConocoPhillips | 56,469 | 3,947,183 | ||||||
Enbridge, Inc. | 152,969 | 4,758,866 | ||||||
EOG Resources, Inc. | 22,213 | 2,339,917 | ||||||
Marathon Petroleum Corp. | 100,578 | 7,085,720 | ||||||
Occidental Petroleum Corp. | 99,036 | 6,642,345 | ||||||
Phillips 66 | 52,230 | 5,370,289 | ||||||
Plains GP Holdings, L.P., Class A (a) | 142,827 | 3,052,213 | ||||||
Williams Cos., Inc. | 83,750 | 2,037,637 | ||||||
|
| |||||||
41,426,118 | ||||||||
|
|
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 13 |
Portfolio of Investments October 31, 2018 (continued)
Shares | Value | |||||||
Pharmaceuticals 3.8% |
| |||||||
Allergan PLC | 93,878 | $ | 14,833,663 | |||||
Johnson & Johnson | 43,747 | 6,124,143 | ||||||
Merck & Co., Inc. | 76,838 | 5,656,045 | ||||||
Pfizer, Inc. | 302,024 | 13,005,153 | ||||||
|
| |||||||
39,619,004 | ||||||||
|
| |||||||
Road & Rail 2.3% |
| |||||||
CSX Corp. | 104,378 | 7,187,469 | ||||||
Union Pacific Corp. | 115,527 | 16,892,358 | ||||||
|
| |||||||
24,079,827 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment 2.4% |
| |||||||
Applied Materials, Inc. | 172,822 | 5,682,387 | ||||||
Cypress Semiconductor Corp. | 235,101 | 3,042,207 | ||||||
Intel Corp. | 33,678 | 1,578,825 | ||||||
Marvell Technology Group, Ltd. | 321,158 | 5,270,203 | ||||||
Texas Instruments, Inc. | 19,109 | 1,773,888 | ||||||
Universal Display Corp. | 60,915 | 7,493,154 | ||||||
|
| |||||||
24,840,664 | ||||||||
|
| |||||||
Software 6.6% |
| |||||||
LogMeIn, Inc. | 42,906 | 3,695,065 | ||||||
Microsoft Corp. | 454,008 | 48,492,594 | ||||||
Oracle Corp. | 212,976 | 10,401,748 | ||||||
PTC, Inc. (a) | 74,058 | 6,103,120 | ||||||
|
| |||||||
68,692,527 | ||||||||
|
| |||||||
Specialty Retail 3.0% |
| |||||||
CarMax, Inc. (a) | 51,005 | 3,463,750 | ||||||
Home Depot, Inc. | 67,040 | 11,790,995 | ||||||
Lowe’s Cos., Inc. | 100,358 | 9,556,089 | ||||||
TJX Cos., Inc. | 56,007 | 6,154,049 | ||||||
|
| |||||||
30,964,883 | ||||||||
|
|
Shares | Value | |||||||
Technology Hardware, Storage & Peripherals 7.5% |
| |||||||
Apple, Inc. | 355,040 | $ | 77,704,054 | |||||
|
| |||||||
Textiles, Apparel & Luxury Goods 0.3% |
| |||||||
Hanesbrands, Inc. | 201,780 | 3,462,545 | ||||||
|
| |||||||
Tobacco 0.5% |
| |||||||
Philip Morris International, Inc. | 59,180 | 5,211,983 | ||||||
|
| |||||||
Total Common Stocks | 1,023,514,047 | |||||||
|
| |||||||
Short-Term Investment 1.4% |
| |||||||
Affiliated Investment Company 1.4% |
| |||||||
MainStay U.S. Government Liquidity Fund, 2.075% (b) | 14,615,125 | 14,615,125 | ||||||
|
| |||||||
Total Short-Term Investment | 14,615,125 | |||||||
|
| |||||||
Total Investments | 99.7 | % | 1,038,129,172 | |||||
Other Assets, Less Liabilities | 0.3 | 2,891,587 | ||||||
Net Assets | 100.0 | % | $ | 1,041,020,759 |
† | Percentages indicated are based on Fund net assets. |
‡ | Less than one-tenth of a percent. |
(a) | Non-income producing security. |
(b) | Current yield as of October 31, 2018. |
The following abbreviation is used in the preceding pages:
ADR—American Depositary Receipt
The following is a summary of the fair valuations according to the inputs used as of October 31, 2018, for valuing the Fund’s assets:
Asset Valuation Inputs
Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Investments in Securities (a) | ||||||||||||||||
Common Stocks | $ | 1,023,514,047 | $ | — | $ | — | $ | 1,023,514,047 | ||||||||
Short-Term Investment | ||||||||||||||||
Affiliated Investment Company | 14,615,125 | — | — | 14,615,125 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 1,038,129,172 | $ | — | $ | — | $ | 1,038,129,172 | ||||||||
|
|
|
|
|
|
|
|
(a) | For a complete listing of investments and their industries, see the Portfolio of Investments. |
14 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statement of Assets and Liabilities as of October 31, 2018
Assets |
| |||
Investment in securities, at value (identified cost $633,628,147) | $ | 1,023,514,047 | ||
Investment in affiliated investment companies, at value (identified cost $14,615,125) | 14,615,125 | |||
Due from custodian | 2,105,782 | |||
Cash | 5,983 | |||
Receivables: | ||||
Investment securities sold | 4,371,438 | |||
Dividends | 1,137,099 | |||
Fund shares sold | 94,621 | |||
Other assets | 43,881 | |||
|
| |||
Total assets | 1,045,887,976 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investment securities purchased | 3,238,274 | |||
Manager (See Note 3) | 693,615 | |||
Fund shares redeemed | 499,750 | |||
NYLIFE Distributors (See Note 3) | 183,489 | |||
Transfer agent (See Note 3) | 182,178 | |||
Shareholder communication | 34,157 | |||
Professional fees | 20,093 | |||
Custodian | 11,200 | |||
Trustees | 2,734 | |||
Accrued expenses | 1,727 | |||
|
| |||
Total liabilities | 4,867,217 | |||
|
| |||
Net assets | $ | 1,041,020,759 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest outstanding (par value of $.01 per share) unlimited number of shares authorized | $ | 251,935 | ||
Additional paid-in capital | 553,551,464 | |||
|
| |||
553,803,399 | ||||
Total distributable earnings (loss) | 487,217,360 | |||
|
| |||
Net assets | $ | 1,041,020,759 | ||
|
|
Class A | ||||
Net assets applicable to outstanding shares | $ | 384,637,013 | ||
|
| |||
Shares of beneficial interest outstanding | 9,335,814 | |||
|
| |||
Net asset value per share outstanding | $ | 41.20 | ||
Maximum sales charge (5.50% of offering price) | 2.40 | |||
|
| |||
Maximum offering price per share outstanding | $ | 43.60 | ||
|
| |||
Investor Class | ||||
Net assets applicable to outstanding shares | $ | 76,844,024 | ||
|
| |||
Shares of beneficial interest outstanding | 1,867,546 | |||
|
| |||
Net asset value per share outstanding | $ | 41.15 | ||
Maximum sales charge (5.50% of offering price) | 2.39 | |||
|
| |||
Maximum offering price per share outstanding | $ | 43.54 | ||
|
| |||
Class B | ||||
Net assets applicable to outstanding shares | $ | 26,570,778 | ||
|
| |||
Shares of beneficial interest outstanding | 727,352 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 36.53 | ||
|
| |||
Class C | ||||
Net assets applicable to outstanding shares | $ | 65,288,205 | ||
|
| |||
Shares of beneficial interest outstanding | 1,787,302 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 36.53 | ||
|
| |||
Class I | ||||
Net assets applicable to outstanding shares | $ | 484,838,659 | ||
|
| |||
Shares of beneficial interest outstanding | 11,406,529 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 42.51 | ||
|
| |||
Class R1 | ||||
Net assets applicable to outstanding shares | $ | 30,115 | ||
|
| |||
Shares of beneficial interest outstanding | 725 | |||
|
| |||
Net asset value and offering price per share outstanding (a) | $ | 41.53 | ||
|
| |||
Class R2 | ||||
Net assets applicable to outstanding shares | $ | 881,073 | ||
|
| |||
Shares of beneficial interest outstanding | 21,290 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 41.38 | ||
|
| |||
Class R3 | ||||
Net assets applicable to outstanding shares | $ | 1,930,892 | ||
|
| |||
Shares of beneficial interest outstanding | 46,922 | |||
|
| |||
Net asset value and offering price per share outstanding | $ | 41.15 | ||
|
|
(a) | The difference between the recalculated and stated NAV was caused by rounding. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 15 |
Statement of Operations for the year ended October 31, 2018
Investment Income (Loss) |
| |||
Income | ||||
Dividends – Unaffiliated (a) | $ | 19,690,434 | ||
Dividends – Affiliated | 63,189 | |||
Interest | 62,324 | |||
Securities lending | 11,915 | |||
Other | 3,993 | |||
|
| |||
Total income | 19,831,855 | |||
|
| |||
Expenses | ||||
Manager (See Note 3) | 8,910,527 | |||
Distribution/Service—Class A (See Note 3) | 1,004,309 | |||
Distribution/Service—Investor Class (See Note 3) | 217,886 | |||
Distribution/Service—Class B (See Note 3) | 322,073 | |||
Distribution/Service—Class C (See Note 3) | 755,721 | |||
Distribution/Service—Class R2 (See Note 3) | 6,207 | |||
Distribution/Service—Class R3 (See Note 3) | 9,910 | |||
Transfer agent (See Note 3) | 1,152,333 | |||
Professional fees | 123,963 | |||
Registration | 108,922 | |||
Shareholder communication | 82,406 | |||
Trustees | 26,177 | |||
Custodian | 13,014 | |||
Shareholder service (See Note 3) | 5,691 | |||
Miscellaneous | 50,613 | |||
|
| |||
Total expenses before waiver/reimbursement | 12,789,752 | |||
Expense waiver/reimbursement from Manager (See Note 3) | (46,800 | ) | ||
|
| |||
Net expenses | 12,742,952 | |||
|
| |||
Net investment income (loss) | 7,088,903 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions |
| |||
Net realized gain (loss) on: | ||||
Investment transactions | 110,015,245 | |||
Foreign currency transactions | (4,107 | ) | ||
|
| |||
Net realized gain (loss) on investments and foreign currency transactions | 110,011,138 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (51,594,863 | ) | ||
Translation of other assets and liabilities in foreign currencies | (2,143 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (51,597,006 | ) | ||
|
| |||
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 58,414,132 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 65,503,035 | ||
|
|
(a) | Dividends recorded net of foreign withholding taxes in the amount of $52,736. |
16 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Statements of Changes in Net Assets
for the years ended October 31, 2018 and October 31, 2017
2018 | 2017 | |||||||
Increase (Decrease) in Net Assets |
| |||||||
Operations: | ||||||||
Net investment income (loss) | $ | 7,088,903 | $ | 7,841,758 | ||||
Net realized gain (loss) on investments and foreign currency transactions | 110,011,138 | 153,829,744 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | (51,597,006 | ) | 132,520,900 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 65,503,035 | 294,192,402 | ||||||
|
| |||||||
Distributions to shareholders(1): | ||||||||
Class A | (40,500,400 | ) | ||||||
Investor Class | (9,291,957 | ) | ||||||
Class B | (3,932,227 | ) | ||||||
Class C | (8,673,806 | ) | ||||||
Class I | (63,813,864 | ) | ||||||
Class R1 | (340,768 | ) | ||||||
Class R2 | (268,113 | ) | ||||||
Class R3 | (101,402 | ) | ||||||
|
| |||||||
(126,922,537 | ) | |||||||
|
| |||||||
Dividends to shareholders from net investment income: | ||||||||
Class A | (3,734,528 | ) | ||||||
Investor Class | (1,571,103 | ) | ||||||
Class B | (170,343 | ) | ||||||
Class C | (373,608 | ) | ||||||
Class I | (11,063,508 | ) | ||||||
Class R1 | (36,693 | ) | ||||||
Class R2 | (41,865 | ) | ||||||
Class R3 | (7,953 | ) | ||||||
|
| |||||||
(16,999,601 | ) | |||||||
|
| |||||||
Distributions to shareholders from net realized gain on investments: | ||||||||
Class A | (3,062,641 | ) | ||||||
Investor Class | (1,519,616 | ) | ||||||
Class B | (493,374 | ) | ||||||
Class C | (1,082,445 | ) | ||||||
Class I | (7,599,967 | ) | ||||||
Class R1 | (27,325 | ) | ||||||
Class R2 | (37,835 | ) | ||||||
Class R3 | (9,188 | ) | ||||||
|
| |||||||
(13,832,391 | ) | |||||||
|
| |||||||
Total dividends and distributions to shareholders | (126,922,537 | ) | (30,831,992 | ) | ||||
|
|
2018 | 2017 | |||||||
Capital share transactions: | ||||||||
Net proceeds from sale of shares | 63,328,482 | 78,914,051 | ||||||
Net asset value of shares issued to shareholders in reinvestment of dividends and distributions | 123,817,205 | 30,117,489 | ||||||
Cost of shares redeemed | (322,246,615 | ) | (508,018,962 | ) | ||||
|
| |||||||
Increase (decrease) in net assets derived from capital share transactions | (135,100,928 | ) | (398,987,422 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (196,520,430 | ) | (135,627,012 | ) | ||||
Net Assets | ||||||||
Beginning of year | 1,237,541,189 | 1,373,168,201 | ||||||
|
| |||||||
End of year(2) | $ | 1,041,020,759 | $ | 1,237,541,189 | ||||
|
|
(1) | For the year ended October 31, 2018, the requirement to disclose dividends and distributions paid to shareholders from net investments income and/or net realized gain on investments was modified and are now presented together as distributions to shareholders. |
(2) | End of year net assets includes undistributed (overdistributed) net investment income of $6,389,436 in 2017. The requirement to disclose the corresponding amount as of October 31, 2018 was eliminated. See Note 4 for tax basis of distributable earnings. |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 17 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class A | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 43.76 | $ | 35.92 | $ | 43.32 | $ | 46.81 | $ | 43.28 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.23 | 0.21 | 0.33 | 0.38 | 0.67 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.78 | 8.50 | (0.63 | ) | 0.50 | 4.21 | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | 0.01 | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 2.02 | 8.71 | (0.30 | ) | 0.88 | 4.88 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.21 | ) | (0.48 | ) | (0.40 | ) | (0.67 | ) | (0.45 | ) | ||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (4.58 | ) | (0.87 | ) | (7.10 | ) | (4.37 | ) | (1.35 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 41.20 | $ | 43.76 | $ | 35.92 | $ | 43.32 | $ | 46.81 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 4.88 | % | 24.73 | % | (0.57 | %) | 1.80 | % | 11.55 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.57 | % | 0.52 | % | 0.92 | % | 0.85 | % | 1.49 | % | ||||||||||
Net expenses (c) | 1.10 | % | 1.10 | %(d) | 1.09 | % (d) | 1.11 | % | 1.11 | % | ||||||||||
Portfolio turnover rate | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 384,637 | $ | 389,582 | $ | 285,431 | $ | 336,812 | $ | 364,162 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
Year ended October 31, | ||||||||||||||||||||
Investor Class | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 43.68 | $ | 35.85 | $ | 43.27 | $ | 46.77 | $ | 43.24 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.17 | 0.14 | 0.25 | 0.31 | 0.60 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.78 | 8.49 | (0.63 | ) | 0.50 | 4.21 | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.95 | 8.63 | (0.38 | ) | 0.81 | 4.81 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.11 | ) | (0.41 | ) | (0.34 | ) | (0.61 | ) | (0.38 | ) | ||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (4.48 | ) | (0.80 | ) | (7.04 | ) | (4.31 | ) | (1.28 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 41.15 | $ | 43.68 | $ | 35.85 | $ | 43.27 | $ | 46.77 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 4.69 | % | 24.50 | % | (0.79 | %) | 1.63 | % | 11.38 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.39 | % | 0.36 | % | 0.71 | % | 0.71 | % | 1.34 | % | ||||||||||
Net expenses (c) | 1.29 | % | 1.29 | %(d) | 1.29 | % (d) | 1.25 | % | 1.26 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 1.31 | % | 1.29 | % | 1.29 | % | 1.25 | % | 1.26 | % | ||||||||||
Portfolio turnover rate | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 76,844 | $ | 90,928 | $ | 139,775 | $ | 151,582 | $ | 152,202 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
18 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class B | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 39.43 | $ | 32.42 | $ | 39.74 | $ | 43.25 | $ | 40.08 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.13 | ) | (0.13 | ) | (0.01 | ) | (0.01 | ) | 0.26 | |||||||||||
Net realized and unrealized gain (loss) on investments | 1.60 | 7.67 | (0.60 | ) | 0.48 | 3.89 | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.47 | 7.54 | (0.61 | ) | 0.47 | 4.15 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | — | (0.14 | ) | (0.01 | ) | (0.28 | ) | (0.08 | ) | |||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (4.37 | ) | (0.53 | ) | (6.71 | ) | (3.98 | ) | (0.98 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 36.53 | $ | 39.43 | $ | 32.42 | $ | 39.74 | $ | 43.25 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 3.91 | % | 23.55 | % | (1.52 | %) | 0.89 | % | 10.55 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.35 | %) | (0.37 | %) | (0.03 | %) | (0.03 | %) | 0.63 | % | ||||||||||
Net expenses (c) | 2.04 | % | 2.05 | % (d) | 2.04 | % (d) | 2.00 | % | 2.01 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 2.06 | % | 2.05 | % | 2.04 | % | 2.00 | % | 2.01 | % | ||||||||||
Portfolio turnover rate | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 26,571 | $ | 35,841 | $ | 40,977 | $ | 54,423 | $ | 71,195 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
Year ended October 31, | ||||||||||||||||||||
Class C | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 39.43 | $ | 32.42 | $ | 39.73 | $ | 43.25 | $ | 40.08 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | (0.14 | ) | (0.13 | ) | (0.01 | ) | (0.02 | ) | 0.25 | |||||||||||
Net realized and unrealized gain (loss) on investments | 1.61 | 7.67 | (0.59 | ) | 0.48 | 3.90 | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.47 | 7.54 | (0.60 | ) | 0.46 | 4.15 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | — | (0.14 | ) | (0.01 | ) | (0.28 | ) | (0.08 | ) | |||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (4.37 | ) | (0.53 | ) | (6.71 | ) | (3.98 | ) | (0.98 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 36.53 | $ | 39.43 | $ | 32.42 | $ | 39.73 | $ | 43.25 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 3.91 | % | 23.55 | % | (1.52 | %) | 0.89 | % | 10.55 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | (0.36 | %) | (0.37 | %) | (0.03 | %) | (0.04 | %) | 0.60 | % | ||||||||||
Net expenses (c) | 2.04 | % | 2.05 | % (d) | 2.04 | % (d) | 2.00 | % | 2.01 | % | ||||||||||
Expenses (before waiver/reimbursement) (c) | 2.06 | % | 2.05 | % | 2.04 | % | 2.00 | % | 2.01 | % | ||||||||||
Portfolio turnover rate | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 65,288 | $ | 79,665 | $ | 92,457 | $ | 125,642 | $ | 143,427 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 19 |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class I | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 45.00 | $ | 36.92 | $ | 44.35 | $ | 47.82 | $ | 44.18 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.36 | 0.34 | 0.43 | 0.50 | 0.80 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.84 | 8.70 | (0.65 | ) | 0.52 | 4.29 | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 2.20 | 9.04 | (0.22 | ) | 1.02 | 5.09 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.32 | ) | (0.57 | ) | (0.51 | ) | (0.79 | ) | (0.55 | ) | ||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (4.69 | ) | (0.96 | ) | (7.21 | ) | (4.49 | ) | (1.45 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 42.51 | $ | 45.00 | $ | 36.92 | $ | 44.35 | $ | 47.82 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 5.17 | % | 25.01 | % | (0.33 | %) | 2.06 | % | 11.82 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.83 | % | 0.84 | % | 1.17 | % | 1.10 | % | 1.76 | % | ||||||||||
Net expenses (c) | 0.85 | % | 0.85 | %(d) | 0.84 | % (d) | 0.86 | % | 0.86 | % | ||||||||||
Portfolio turnover rate | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 484,839 | $ | 634,730 | $ | 807,694 | $ | 1,119,884 | $ | 1,506,564 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class I shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
Year ended October 31, | ||||||||||||||||||||
Class R1 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 44.07 | $ | 36.16 | $ | 43.57 | $ | 47.05 | $ | 43.49 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.37 | 0.27 | 0.38 | 0.45 | 0.73 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.73 | 8.56 | (0.63 | ) | 0.50 | 4.24 | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 2.10 | 8.83 | (0.25 | ) | 0.95 | 4.97 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.27 | ) | (0.53 | ) | (0.46 | ) | (0.73 | ) | (0.51 | ) | ||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (4.64 | ) | (0.92 | ) | (7.16 | ) | (4.43 | ) | (1.41 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 41.53 | $ | 44.07 | $ | 36.16 | $ | 43.57 | $ | 47.05 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 5.05 | % | 24.92 | % | (0.43 | %) | 1.94 | % | 11.71 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.88 | % | 0.67 | % | 1.06 | % | 1.02 | % | 1.63 | % | ||||||||||
Net expenses (c) | 0.95 | % | 0.95 | %(d) | 0.94 | % (d) | 0.96 | % | 0.96 | % | ||||||||||
Portfolio turnover rate | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 30 | $ | 3,208 | $ | 2,500 | $ | 3,607 | $ | 7,368 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R1 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
20 | MainStay MAP Equity Fund | The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. |
Financial Highlights selected per share data and ratios
Year ended October 31, | ||||||||||||||||||||
Class R2 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 43.93 | $ | 36.05 | $ | 43.44 | $ | 46.92 | $ | 43.38 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.21 | 0.20 | 0.29 | 0.34 | 0.63 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.78 | 8.50 | (0.63 | ) | 0.49 | 4.22 | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.99 | 8.70 | (0.34 | ) | 0.83 | 4.85 | ||||||||||||||
|
| �� |
|
|
|
|
|
|
|
| ||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.17 | ) | (0.43 | ) | (0.35 | ) | (0.61 | ) | (0.41 | ) | ||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (4.54 | ) | (0.82 | ) | (7.05 | ) | (4.31 | ) | (1.31 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 41.38 | $ | 43.93 | $ | 36.05 | $ | 43.44 | $ | 46.92 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 4.77 | % | 24.60 | % | (0.68 | %) | 1.68 | % | 11.43 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.50 | % | 0.51 | % | 0.80 | % | 0.76 | % | 1.42 | % | ||||||||||
Net expenses (c) | 1.20 | % | 1.20 | %(d) | 1.20 | % (d) | 1.21 | % | 1.21 | % | ||||||||||
Portfolio turnover rate | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 881 | $ | 2,583 | $ | 3,528 | $ | 9,993 | $ | 15,956 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R2 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
Year ended October 31, | ||||||||||||||||||||
Class R3 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net asset value at beginning of year | $ | 43.71 | $ | 35.87 | $ | 43.22 | $ | 46.68 | $ | 43.16 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income (loss) (a) | 0.08 | 0.07 | 0.20 | 0.22 | 0.54 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.79 | 8.50 | (0.62 | ) | 0.51 | 4.17 | ||||||||||||||
Net realized and unrealized gain (loss) on foreign currency transactions‡ | (0.00 | ) | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total from investment operations | 1.87 | 8.57 | (0.42 | ) | 0.73 | 4.71 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.06 | ) | (0.34 | ) | (0.23 | ) | (0.49 | ) | (0.29 | ) | ||||||||||
From net realized gain on investments | (4.37 | ) | (0.39 | ) | (6.70 | ) | (3.70 | ) | (0.90 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions | (4.43 | ) | (0.73 | ) | (6.93 | ) | (4.19 | ) | (1.19 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value at end of year | $ | 41.15 | $ | 43.71 | $ | 35.87 | $ | 43.22 | $ | 46.68 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investment return (b) | 4.51 | % | 24.29 | % | (0.91 | %) | 1.42 | % | 11.18 | % | ||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Net investment income (loss) | 0.20 | % | 0.17 | % | 0.57 | % | 0.51 | % | 1.20 | % | ||||||||||
Net expenses (c) | 1.45 | % | 1.45 | %(d) | 1.44 | % (d) | 1.46 | % | 1.46 | % | ||||||||||
Portfolio turnover rate | 15 | % | 15 | % | 42 | % | 51 | % | 32 | % | ||||||||||
Net assets at end of year (in 000’s) | $ | 1,931 | $ | 1,004 | $ | 806 | $ | 1,062 | $ | 1,400 |
‡ | Less than one cent per share. |
(a) | Per share data based on average shares outstanding during the year. |
(b) | Total investment return is calculated exclusive of sales charges and assumes the reinvestment of dividends and distributions. Class R3 shares are not subject to sales charges. For periods of less than one year, total return is not annualized. |
(c) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro-rata share of the fees and expenses of the Underlying Funds in which it invests. Such indirect expenses are not included in the above expense ratios. |
(d) | Net of interest expense which is less than one-tenth of a percent. (See Note 6) |
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. | 21 |
Note 1–Organization and Business
The MainStay Funds (the “Trust”) was organized on January 9, 1986, as a Massachusetts business trust and is governed by a Declaration of Trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and is comprised of twelve funds (collectively referred to as the “Funds”). These financial statements and notes relate to the MainStay MAP Equity Fund (the “Fund”), a “diversified” fund, as that term is defined in the 1940 Act, as interpreted or modified by regulatory authorities having jurisdiction, from time to time.
The Fund currently has ten classes of shares registered for sale. Class A, Class B and Class C shares commenced operations on June 9, 1999. Class I shares commenced operations in January 21, 1971 (under a former class designation) and were redesignated as Class I shares on June 9, 1999. Class R1 and Class R2 shares commenced operations on January 2, 2004. Class R3 shares commenced operations on April 28, 2006. Investor Class shares commenced operations on February 28, 2008. Class R6 and Class T shares were registered for sale effective as of February 28, 2017. As of October 31, 2018, Class R6 and Class T shares were not yet offered for sale. Effective February 28, 2017, Class B shares of the MainStay Group of Funds were closed to all new purchases as well as additional investments by existing Class B shareholders. Existing Class B shareholders may continue to reinvest dividends and capital gains distributions, as well as exchange their Class B shares for Class B shares of other funds in the MainStay Group of Funds as permitted by the current exchange privileges. Class B shareholders continue to be subject to any applicable contingent deferred sales charge (“CDSC”) at the time of redemption. All other features of the Class B shares, including but not limited to the fees and expenses applicable to Class B shares, remain unchanged. Unless redeemed, Class B shareholders will remain in Class B shares of their respective fund until the Class B shares are converted to Class A or Investor Class shares pursuant to the applicable conversion schedule.
Class A and Investor Class shares are offered at net asset value (“NAV”) per share plus an initial sales charge. No initial sales charge applies to investments of $1 million or more (and certain other qualified purchases) in Class A and Investor Class shares. Effective August 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of Class A and Investor Class shares made within 18 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made from January 1, 2017, through July 31, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within 24 months of the date of purchase on shares that were purchased without an initial sales charge. For purchases of Class A and Investor Class shares made prior to January 1, 2017, a CDSC of 1.00% may be imposed on certain redemptions of such shares made within one year of the date of purchase on shares that were purchased without an initial sales charge. Class C shares are offered at NAV without an initial sales charge, although a 1.00% CDSC may be imposed on certain redemptions of such shares made within one year of the date of purchase of Class C shares. When Class B shares were offered, they were offered at NAV without an initial sales charge, although a CDSC that declines depending on the number of years a shareholder has held its Class B shares may be imposed on certain redemptions of such shares made
within six years of the date of purchase of such shares. Class T shares are currently expected to be offered at NAV plus an initial sales charge. Class I, Class R1, Class R2 and Class R3 shares are offered at NAV without a sales charge. Class R6 shares are currently expected to be offered at NAV without a sales charge. Depending upon eligibility, Class B shares convert to either Class A or Investor Class shares at the end of the calendar quarter eight years after the date they were purchased. Additionally, as disclosed in the Fund’s prospectus, Class A shares may convert automatically to Investor Class shares and Investor Class shares may convert automatically to Class A shares. Under certain circumstances and as may be permitted by the Trust’s multiple class plan pursuant to Rule 18f-3 under the 1940 Act, specified share classes of the Fund may be converted to one or more other share classes of the Fund as disclosed in the capital share transactions within these Notes. The classes of shares have the same voting (except for issues that relate solely to one class), dividend, liquidation and other rights, and the same terms and conditions, except that under distribution plans pursuant to Rule 12b-1 under the 1940 Act, Class B and Class C shares are subject to higher distribution and/or service fees than Class A, Investor Class, Class T, Class R2 and Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee. Class R1, Class R2 and Class R3 shares are subject to a shareholder service fee, which is in addition to fees paid under the distribution plans for Class R2 and Class R3 shares.
The Fund’s investment objective is to seek long-term appreciation of capital.
Note 2–Significant Accounting Policies
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services—Investment Companies. The Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(A) Securities Valuation. Investments are usually valued as of the close of regular trading on the New York Stock Exchange (the “Exchange”) (usually 4:00 p.m. Eastern time) on each day the Fund is open for business (“valuation date”).
The Board of Trustees of the Trust (the “Board”) adopted procedures establishing methodologies for the valuation of the Fund’s securities and other assets and delegated the responsibility for valuation determinations under those procedures to the Valuation Committee of the Trust (the “Valuation Committee”). The Board authorized the Valuation Committee to appoint a Valuation Subcommittee (the “Subcommittee”) to deal in the first instance with establishing the prices of securities for which market quotations are not readily available or the prices of which are not otherwise readily determinable under these procedures. The Subcommittee meets (in person, via electronic mail or via teleconference) on an as-needed basis. Subsequently, the Valuation Committee meets to ensure that actions taken by the Subcommittee were appropriate. The procedures state that, subject to the oversight of the Board and unless otherwise noted, the responsibility for the day-to-day valuation of portfolio assets (including fair value measurements for the Fund’s assets and liabilities) rests with New York Life
22 | MainStay MAP Equity Fund |
Investment Management LLC (“New York Life Investments” or the “Manager”), aided to whatever extent necessary by the Subadvisors (as defined in Note 3(A)).
To assess the appropriateness of security valuations, the Manager, the Subadvisors or the Fund’s third-party service provider, who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities and the sale prices to the prior and current day prices and challenges prices with changes exceeding certain tolerance levels with third-party pricing services or broker sources. For those securities valued through either a standardized fair valuation methodology or a fair valuation measurement, the Subcommittee deals in the first instance with such valuation and the Valuation Committee reviews and affirms, if appropriate, the reasonableness of the valuation based on such methodologies and measurements on a regular basis after considering information that is reasonably available and deemed relevant by the Valuation Committee. Any action taken by the Subcommittee with respect to the valuation of a portfolio security or other asset is submitted for review and ratification (if appropriate) to the Valuation Committee and the Board at the next regularly scheduled meeting.
“Fair value” is defined as the price the Fund would reasonably expect to receive upon selling an asset or liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the asset or liability. Fair value measurements are determined within a framework that establishes a three-tier hierarchy which maximizes the use of observable market data and minimizes the use of unobservable inputs to establish a classification of fair value measurements for disclosure purposes. “Inputs” refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks associated with investing in those assets or liabilities. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for an identical asset or liability |
• | Level 2—other significant observable inputs (including quoted prices for a similar asset or liability in active markets, interest rates and yield curves, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions about the assumptions that market participants would use in measuring fair value of an asset or liability) |
The level of an asset or liability within the fair value hierarchy is based on the lowest level of an input, both individually and in the aggregate, that is significant to the fair value measurement. As of October 31, 2018, the aggregate value by input level of the Fund’s assets and liabilities is included at the end of the Fund’s Portfolio of Investments.
The Fund may use third-party vendor evaluations, whose prices may be derived from one or more of the following standard inputs, among others:
• Broker/dealer quotes | • Benchmark securities | |
• Two-sided markets | • Reference data (corporate actions or material event notices) | |
• Bids/offers | • Monthly payment information | |
• Industry and economic events | • Reported trades |
An asset or liability for which market values cannot be measured using the methodologies described above is valued by methods deemed reasonable in good faith by the Valuation Committee, following the procedures established by the Board, to represent fair value. Under these procedures, the Fund generally uses a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information. The Fund may also use an income-based valuation approach in which the anticipated future cash flows of the asset or liability are discounted to calculate fair value. Discounts may also be applied due to the nature and/or duration of any restrictions on the disposition of the asset or liability. Fair value represents a good faith approximation of the value of a security. Fair value determinations involve the consideration of a number of subjective factors, an analysis of applicable facts and circumstances and the exercise of judgment. As a result, it is possible that the fair value for a security determined in good faith in accordance with the Fund’s valuation procedures may differ from valuations for the same security determined by other funds using their own valuation procedures. Although the Fund’s valuation procedures are designed to value a security at the price the Fund may reasonably expect to receive upon the security’s sale in an orderly transaction, there can be no assurance that any fair value determination thereunder would, in fact, approximate the amount that the Fund would actually realize upon the sale of the security or the price at which the security would trade if a reliable market price were readily available. During the year ended October 31, 2018, there were no material changes to the fair value methodologies.
Securities which may be valued in this manner include, but are not limited to: (i) a security for which trading has been halted or suspended; (ii) a debt security that has recently gone into default and for which there is not a current market quotation; (iii) a security of an issuer that has entered into a restructuring; (iv) a security that has been delisted from a national exchange; (v) a security for which the market price is not readily available from a third-party pricing source or, if so provided, does not, in the opinion of the Manager or the Subadvisors, reflect the security’s market value; (vi) a security subject to trading collars for which no or limited trading takes place; and (vii) a security whose principal market has been temporarily closed at a time when, under normal conditions, it would be open. Securities valued in this manner are generally categorized as Level 3 in the hierarchy. As of October 31, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Certain securities held by the Fund may principally trade in foreign markets. Events may occur between the time the foreign markets close and the time at which the Fund’s NAVs are calculated. These events may include, but are not limited to, situations relating to a single issuer
23 |
Notes to Financial Statements (continued)
in a market sector, significant fluctuations in U.S. or foreign markets, natural disasters, armed conflicts, governmental actions or other developments not tied directly to the securities markets. Should the Manager or the Subadvisors conclude that such events may have affected the accuracy of the last price of such securities reported on the local foreign market, the Subcommittee may, pursuant to procedures adopted by the Board, adjust the value of the local price to reflect the estimated impact on the price of such securities as a result of such events. In this instance, securities are generally categorized as Level 3 in the hierarchy. Additionally, certain foreign equity securities are also fair valued whenever the movement of a particular index exceeds certain thresholds. In such cases, the securities are fair valued by applying factors provided by a third-party vendor in accordance with valuation procedures adopted by the Board and are generally categorized as Level 2 in the hierarchy. As of October 31, 2018, there were no securities held by the Fund that were fair valued in such a manner.
Equity securities are valued at the last quoted sales prices as of the close of regular trading on the relevant exchange on each valuation date. Securities that are not traded on the valuation date are valued at the mean of the last quoted bid and ask prices. Prices are normally taken from the principal market in which each security trades.
Investments in mutual funds, including money market funds, are valued at their respective NAVs as of the close of the Exchange on the valuation date. These securities are generally categorized as Level 1 in the hierarchy.
Temporary cash investments acquired in excess of 60 days to maturity at the time of purchase are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities and ratings), both as furnished by independent pricing services. Other temporary cash investments which mature in 60 days or less at the time of purchase (“Short-Term Investments”) are valued using the amortized cost method of valuation, unless the use of such method would be inappropriate. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between such cost and the value on maturity date. Amortized cost approximates the current fair value of a security. Securities valued using the amortized cost method are not valued using quoted prices in an active market and are generally categorized as Level 2 in the hierarchy.
The information above is not intended to reflect an exhaustive list of the methodologies that may be used to value portfolio investments. The valuation procedures permit the use of a variety of valuation methodologies in connection with valuing portfolio investments. The methodology used for a specific type of investment may vary based on the market data available or other considerations. The methodologies summarized above may not represent the specific means by which portfolio investments are valued on any particular business day.
(B) Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable to regulated investment companies and to distribute all of its taxable income to the shareholders of the Fund within the allowable time limits. Therefore, no federal, state and local income tax provisions are required.
Management evaluates the Fund’s tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is permitted only to the extent the position is “more likely than not” to be sustained assuming examination by taxing authorities. Management has analyzed the Fund’s tax positions taken on federal, state and local income tax returns for all open tax years (for up to three tax years) and has concluded that no provisions for federal, state and local income tax are required in the Fund’s financial statements. The Fund’s federal, state and local income tax and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state and local departments of revenue.
(C) Foreign Taxes. The Fund may be subject to foreign taxes on income and other transaction-based taxes imposed by certain countries in which it invests. A portion of the taxes on gains on investments or currency purchases/repatriation may be reclaimable. The Fund will accrue such taxes and reclaims as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
The Fund may be subject to taxation on realized capital gains, repatriation proceeds and other transaction-based taxes imposed by certain countries in which it invests. The Fund will accrue such taxes as applicable based upon its current interpretation of tax rules and regulations that exist in the market in which it invests. Capital gains taxes relating to positions still held are reflected as a liability on the Statement of Assets and Liabilities, as well as an adjustment to the Fund’s net unrealized appreciation (depreciation). Taxes related to capital gains realized, if any, are reflected as part of net realized gain (loss) in the Statement of Operations. Changes in tax liabilities related to capital gains taxes on unrealized investment gains, if any, are reflected as part of the change in net unrealized appreciation (depreciation) on investments in the Statement of Operations. Transaction-based charges are generally assessed as a percentage of the transaction amount.
(D) Dividends and Distributions to Shareholders. Dividends and distributions are recorded on the ex-dividend date. The Fund intends to declare and pay dividends from net investment income and distributions from net realized capital and currency gains, if any, at least annually. Unless the shareholder elects otherwise, all dividends and distributions are reinvested in the same class of shares of the Fund, at NAV. Dividends and distributions to shareholders are determined in accordance with federal income tax regulations and may differ from determinations using GAAP.
(E) Security Transactions and Investment Income. The Fund records security transactions on the trade date. Realized gains and losses on security transactions are determined using the identified cost method. Dividend income is recognized on the ex-dividend date; net of any foreign tax withheld at the source, and interest income is accrued as earned using the effective interest rate method.
Investment income and realized and unrealized gains and losses on investments of the Fund are allocated pro rata to the separate classes of shares based upon their relative net assets on the date the income is earned or realized and unrealized gains and losses are incurred.
24 | MainStay MAP Equity Fund |
(F) Expenses. Expenses of the Trust are allocated to the individual Funds in proportion to the net assets of the respective Funds when the expenses are incurred, except where direct allocations of expenses can be made. Expenses (other than transfer agent expenses and fees incurred under the shareholder services plans and/or the distribution plans further discussed in Note 3(B)) are allocated to separate classes of shares pro rata based upon their relative net assets on the date the expenses are incurred. The expenses borne by the Fund, including those of related parties to the Fund, are shown in the Statement of Operations.
Additionally, the Fund may invest in mutual funds, which are subject to management fees and other fees that may increase the costs of investing in mutual funds versus the costs of owning the underlying securities directly. These indirect expenses of mutual funds are not included in the amounts shown as expenses in the Fund’s Statement of Operations or in the expense ratios included in the financial highlights.
(G) Use of Estimates. In preparing financial statements in conformity with GAAP, management makes estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
(H) Repurchase Agreements. The Fund may enter into repurchase agreements (i.e., buy a security from another party with the agreement that it be sold back in the future) to earn income. The Fund may enter into repurchase agreements only with counterparties, usually financial institutions, that are deemed by the Manager or the Subadvisors to be creditworthy, pursuant to guidelines established by the Board. During the term of any repurchase agreement, the Manager or the Subadvisors will continue to monitor the creditworthiness of the counterparty. Under the 1940 Act, repurchase agreements are considered to be collateralized loans by the Fund to the counterparty secured by the securities transferred to the Fund.
Repurchase agreements are subject to counterparty risk, meaning the Fund could lose money by the counterparty’s failure to perform under the terms of the agreement. The Fund mitigates this risk by ensuring the repurchase agreement is collateralized by cash, U.S. government securities, fixed income securities and/or other securities. The collateral is held by the Fund’s custodian and valued daily on a mark to market basis to determine if the value, including accrued interest, exceeds the repurchase price. In the event of the counterparty’s default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, such as in the event of default or bankruptcy by the counterparty, realization and/or retention of the collateral may be limited or subject to delay, to legal proceedings and possible realized loss to the Fund. As of October 31, 2018, the Fund did not hold any repurchase agreements.
(I) Rights and Warrants. Rights are certificates that permit the holder to purchase a certain number of shares, or a fractional share, of a new stock from the issuer at a specific price. Warrants are instruments that entitle the holder to buy an equity security at a specific price for a specific period of time. These investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of these investments do not necessarily move in tandem with the prices of the underlying securities.
There is risk involved in the purchase of rights and warrants in that these investments are speculative investments. The Fund could also lose the entire value of its investment in warrants if such warrants are not exercised by the date of its expiration. The Fund is exposed to risk until the sale or exercise of each right or warrant is completed. As of October 31, 2018, the Fund did not hold any rights or warrants.
(J) Securities Lending. In order to realize additional income, the Fund may engage in securities lending, subject to the limitations set forth in the 1940 Act and relevant guidance by the staff of the Securities and Exchange Commission (“SEC”). In the event the Fund does engage in securities lending, the Fund will lend through its custodian, State Street Bank and Trust Company (“State Street”). State Street will manage the Fund’s collateral in accordance with the lending agreement between the Fund and State Street, and indemnify the Fund against counterparty risk. The loans will be collateralized by U.S. Treasury securities and/or U.S. Government Agency securities issued or guaranteed by the United States government or its agencies or instrumentalities at least equal at all times to the market value of the securities loaned. The Fund may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should the borrower of the securities experience financial difficulty. The Fund may also record a realized gain or loss on securities deemed sold due to a borrower’s inability to return securities on loan. The Fund bears the risk of any loss on investment of the collateral. The Fund will receive compensation for lending its securities in the form of fees or it will retain a portion of interest on the investment of any cash received as collateral. The Fund will also continue to receive interest and dividends on the securities loaned and any gain or loss in the market price of the securities loaned that may occur during the term of the loan will be for the account of the Fund. Income earned from securities lending activities, if any, is reflected in the Statement of Operations. As of October 31, 2018, the Fund did not have any portfolio securities on loan.
(K) Foreign Currency Transactions. The Fund’s books and records are maintained in U.S. dollars. Prices of securities denominated in foreign currency amounts are translated into U.S. dollars at the mean between the buying and selling rates last quoted by any major U.S. bank at the following dates:
(i) | market value of investment securities, other assets and liabilities—at the valuation date; and |
(ii) | purchases and sales of investment securities, income and expenses—at the date of such transactions. |
The assets and liabilities that are denominated in foreign currency amounts are presented at the exchange rates and market values at the close of the period. The realized and unrealized changes in net assets arising from fluctuations in exchange rates and market prices of securities are not separately presented.
Net realized gain (loss) on foreign currency transactions represents net gains and losses on foreign currency forward contracts, net currency gains or losses realized as a result of differences between the amounts of securities sale proceeds or purchase cost, dividends, interest and withholding taxes as recorded on the Fund’s books, and the U.S. dollar equivalent amount actually received or paid. Net currency gains or losses from valuing such foreign currency denominated assets and liabilities, other than investments at valuation date exchange rates, are reflected in unrealized foreign exchange gains or losses.
25 |
Notes to Financial Statements (continued)
(L) Foreign Securities Risk. The Fund may invest in foreign securities, which carry certain risks that are in addition to the usual risks inherent in domestic securities. These risks include those resulting from currency fluctuations, future adverse political or economic developments and possible imposition of currency exchange blockages or other foreign governmental laws or restrictions. These risks are likely to be greater in emerging markets than in developed markets. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by, among other things, economic or political developments in a specific country, industry or region.
(M) Indemnifications. Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities that may arise out of performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts with third-party service providers that contain a variety of representations and warranties and which may provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. Based on experience, management is of the view that the risk of loss in connection with these potential indemnification obligations is remote. However, there can be no assurance that material liabilities related to such obligations will not arise in the future, which could adversely impact the Fund.
Note 3–Fees and Related Party Transactions
(A) Manager and Subadvisors. New York Life Investments, a registered investment adviser and an indirect, wholly-owned subsidiary of New York Life Insurance Company (“New York Life”), serves as the Fund’s Manager, pursuant to an Amended and Restated Management Agreement (“Management Agreement”). The Manager provides offices, conducts clerical, recordkeeping and bookkeeping services and keeps most of the financial and accounting records required to be maintained by the Fund. Except for the portion of salaries and expenses that are the responsibility of the Fund, the Manager pays the salaries and expenses of all personnel affiliated with the Fund and certain operational expenses of the Fund. The Fund reimburses New York Life Investments in an amount equal to a portion of the compensation of the Chief Compliance Officer attributable to the Fund. Markston International LLC (“Markston” or a “Subadvisor”) and Epoch Investment Partners, Inc. (“Epoch” or a “Subadvisor”), each a registered investment adviser, serve as Subadvisors to the Fund and each manages a portion of the Fund’s assets, as designated by New York Life Investments from time to time, subject to the oversight of New York Life Investments. Each Subadvisor is responsible for the day-to-day portfolio management of the Fund with respect to its allocated portion of the Fund’s assets. Pursuant to the terms of an Amended and Restated Subadvisory Agreement between New York Life Investments and Epoch, and pursuant to the terms of a Subadvisory Agreement between New York Life Investments and Markston (“Subadvisory Agreements”), New York Life Investments pays for the services of the Subadvisors.
Under the Management Agreement, the Fund pays the Manager a monthly fee for the services performed and the facilities furnished at an annual rate of the Fund’s the Fund’s average daily net assets as follows: 0.75% up to $1 billion; 0.70% from $1 billion to $3 billion; and 0.675% in excess of $3 billion, plus a fee for fund accounting services previously provided by New York Life Investments under a separate fund
accounting agreement furnished at an annual rate of the Fund’s average daily net assets as follows: 0.05% up to $20 million; 0.0333% from $20 million to $100 million; and 0.01% in excess of $100 million. During the year ended October 31, 2018, the effective management fee rate was 0.75% inclusive of a fee for fund accounting services of 0.01% of the Fund’s average daily net assets.
New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Fund Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) of Class R6 do not exceed those of Class I. This agreement will remain in effect until February 28, 2019 and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board.
During the year ended October 31, 2018, New York Life Investments earned fees from the Fund in the amount of $8,910,527 and voluntarily waived and/or reimbursed certain class specific expenses in the amount of $46,800.
State Street provides sub-administration and sub-accounting services to the Fund pursuant to an agreement with New York Life Investments. These services include calculating the daily NAVs of the Fund, maintaining the general ledger and sub-ledger accounts for the calculation of the Fund’s NAVs and assisting New York Life Investments in conducting various aspects of the Fund’s administrative operations. For providing these services to the Fund, State Street is compensated by New York Life Investments.
Effective December 22, 2017, pursuant to an agreement between the Trust and New York Life Investments, New York Life Investments is responsible for providing or procuring certain regulatory reporting services for the Fund. The Fund will reimburse New York Life Investments for the actual costs incurred by New York Life Investments in connection with providing or procuring these services for the Fund.
(B) Distribution, Service and Shareholder Service Fees. The Trust, on behalf of the Fund, has entered into a distribution agreement with NYLIFE Distributors LLC (the “Distributor”), an indirect, wholly-owned subsidiary of New York Life. The Fund has adopted distribution plans (the “Plans”) in accordance with the provisions of Rule 12b-1 under the 1940 Act.
Pursuant to the Class A, Investor Class, Class T and Class R2 Plans, the Distributor receives a monthly distribution fee from the Class A, Investor Class, Class T and Class R2 shares at an annual rate of 0.25% of the average daily net assets of the Class A, Investor Class, Class T and Class R2 shares for distribution and/or service activities as designated by the Distributor. Pursuant to the Class B and Class C Plans, Class B and Class C shares pay the Distributor a monthly distribution fee at an annual rate of 0.75% of the average daily net assets of the Class B and Class C shares, along with a service fee at an annual rate of 0.25% of the average daily net assets of the Class B and Class C shares, for a total 12b-1 fee of 1.00%. Pursuant to the Class R3 Plan, the Distributor receives a monthly distribution and/or service fee from the Class R3 shares at an annual rate of 0.50% of the average daily net assets of the Class R3 shares. Class I, Class R1 and Class R6 shares are not subject to a distribution and/or service fee.
26 | MainStay MAP Equity Fund |
The Plans provide that the distribution and service fees are payable to the Distributor regardless of the amounts actually expended by the Distributor for distribution of the Fund’s shares and service activities.
In accordance with the Shareholder Services Plans for the Class R1, Class R2 and Class R3 shares, the Manager has agreed to provide, through its affiliates or independent third parties, various shareholder and administrative support services to shareholders of the Class R1, Class R2 and Class R3 shares. For its services, the Manager, its affiliates or independent third-party service providers are entitled to a shareholder service fee accrued daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Class R1, Class R2 and Class R3 shares. This is in addition to any fees paid under the Class R2 and Class R3 Plans.
During the year ended October 31, 2018, shareholder service fees incurred by the Fund were as follows:
Class R1 | $ | 1,226 | ||
Class R2 | 2,483 | |||
Class R3 | 1,982 |
(C) Sales Charges. During the year ended October 31, 2018, the Fund was advised by the Distributor that the amount of initial sales charges retained on sales of Class A and Investor Class shares were $39,167 and $25,163, respectively.
During the year ended October 31, 2018, the Fund was also advised that the Distributor retained CDSCs on redemptions of Class A, Investor Class shares, Class B and Class C shares of $453, $8, $28,066 and $1,513, respectively.
(D) Transfer, Dividend Disbursing and Shareholder Servicing Agent. NYLIM Service Company LLC, an affiliate of New York Life Investments, is the Fund’s transfer, dividend disbursing and shareholder servicing agent pursuant to an agreement between NYLIM Service Company LLC and the Trust. NYLIM Service Company LLC has entered into an agreement with DST Asset Manager Solutions, Inc. (“DST”), pursuant to which DST performs certain transfer agent services on behalf of NYLIM Service Company LLC. During the year ended October 31, 2018, transfer agent expenses incurred by the Fund were as follows:
Class A | $ | 251,517 | ||
Investor Class | 238,760 | |||
Class B | 88,331 | |||
Class C | 207,096 | |||
Class I | 363,058 | |||
Class R1 | 769 | |||
Class R2 | 1,558 | |||
Class R3 | 1,244 |
(E) Small Account Fee. Shareholders with small accounts adversely impact the cost of providing transfer agency services. In an effort to reduce total transfer agency expenses, the Fund has implemented a small account fee on certain types of accounts. Certain shareholders with an account balance of less than $1,000 are charged an annual per account fee of $20 (assessed semi-annually), the proceeds from which offset transfer agent fees as reflected in the Statement of Operations.
(F) Investments in Affiliates (in 000’s). During the year ended October 31, 2018, purchases and sales transactions, income earned from investments and shares held of investment companies managed by New York Life Investments or its affiliates were as follows:
Affiliated Investment Companies | Value, Beginning of Year | Purchases at Cost | Proceeds from Sales | Net Realized Gain/(Loss) on sales | Change in Unrealized Appreciation/ (Depreciation) | Value, End of Year | Dividend Income | Other Distributions | Shares End of Year | |||||||||||||||||||||||||||
MainStay U.S. Government Liquidity Fund | $ | — | $ | 118,196 | $ | (103,581 | ) | $ | — | $ | — | $ | 14,615 | $ | 63 | $ | — | 14,615 | ||||||||||||||||||
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(G) Capital. As of October 31, 2018, New York Life and its affiliates beneficially held shares of the Fund with the values and percentages of net assets as follows:
Class I | $13,772,394 | 2.8 | % |
Note 4–Federal Income Tax
As of October 31, 2018, the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, including applicable derivative contracts and other financial instruments, as determined on a federal income tax basis, were as follows:
Federal Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
Investments in Securities | $ | 653,497,344 | $ | 419,095,146 | $ | (34,463,318 | ) | $ | 384,631,828 |
As of October 31, 2018, the components of accumulated gain (loss) on a tax basis were as follows:
Ordinary Income | Accumulated Other Gain (Loss) | Other Temporary Differences | Unrealized Appreciation (Depreciation) | Total Gain (Loss) | ||||
$9,449,010 | $93,143,586 | $— | $384,624,764 | $487,217,360 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is primarily due to wash sale adjustments.
The following table discloses the current year reclassifications between total distributable earnings (loss) and additional paid-in capital arising
27 |
Notes to Financial Statements (continued)
from permanent differences; net assets as of October 31, 2018 were not affected.
Total | Additional Paid-In Capital | |
$(13,911,866) | $13,911,866 |
The reclassifications for the Fund are primarily due to equalization.
During the years ended October 31, 2018 and October 31, 2017, the tax character of distributions paid as reflected in the Statements of Changes in Net Assets were as follows:
2018 | 2017 | |||||||
Distributions paid from: |
| |||||||
Ordinary Income | $ | 24,592,000 | $ | 16,999,601 | ||||
Long-Term Capital Gain | 102,330,537 | 13,832,391 | ||||||
Total | $ | 126,922,537 | $ | 30,831,992 |
Note 5–Custodian
State Street is the custodian of cash and securities held by the Fund. Custodial fees are charged to the Fund based on the Fund’s net assets and/or the market value of securities held by the Fund and the number of certain transactions incurred by the Fund.
Note 6–Line of Credit
The Fund and certain other funds managed by New York Life Investments maintain a line of credit with a syndicate of banks in order to secure a source of funds for temporary purposes to meet unanticipated or excessive redemption requests.
Effective July 31, 2018, under the credit agreement (the “Credit Agreement”), the aggregate commitment amount is $600,000,000 with an additional uncommitted amount of $100,000,000. The commitment fee is an annual rate of 0.15% of the average commitment amount payable quarterly, regardless of usage, to State Street, who serves as the agent to the syndicate. The commitment fee is allocated among the Fund and certain other funds managed by New York Life Investments based upon their respective net assets and other factors. Interest on any revolving credit loan is charged based upon the Federal Funds Rate or the one-month London Interbank Offered Rate (“LIBOR”), whichever is higher. The Credit Agreement expires on July 30, 2019, although the Fund, certain other funds managed by New York Life Investments and the syndicate of banks may renew the Credit Agreement for an additional year on the same or different terms. Prior to July 31, 2018, the aggregate commitment amount and the commitment fee were the same as those under the current Credit Agreement. During the year ended October 31, 2018, there were no borrowings made or outstanding with respect to the Fund under the Credit Agreement.
Note 7–Interfund Lending Program
Pursuant to an exemptive order issued by the SEC, the Fund, along with certain other funds managed by New York Life Investments, may participate in an interfund lending program. The interfund lending program provides an alternative credit facility that permits the Fund and certain other funds managed by New York Life Investments to lend or borrow
money for temporary purposes directly to or from one another, subject to the conditions of the exemptive order. During the year ended October 31, 2018, there were no interfund loans made or outstanding with respect to the Fund.
Note 8–Purchases and Sales of Securities (in 000’s)
During the year ended October 31, 2018, purchases and sales of securities, other than short-term securities, were $169,334 and $421,179, respectively.
Note 9–Capital Share Transactions
Class A | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 453,868 | $ | 19,096,232 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 967,361 | 38,916,938 | ||||||
Shares redeemed | (1,492,836 | ) | (62,832,187 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | (71,607 | ) | (4,819,017 | ) | ||||
Shares converted into Class A (See Note 1) | 545,533 | 23,128,807 | ||||||
Shares converted from Class A (See Note 1) | (41,220 | ) | (1,733,006 | ) | ||||
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Net increase (decrease) | 432,706 | $ | 16,576,784 | |||||
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Year ended October 31, 2017: | ||||||||
Shares sold | 533,831 | $ | 21,446,730 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 179,775 | 6,572,571 | ||||||
Shares redeemed | (1,658,830 | ) | (65,914,254 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | (945,224 | ) | (37,894,953 | ) | ||||
Shares converted into Class A (See Note 1) | 1,941,210 | 81,575,433 | ||||||
Shares converted from Class A (See Note 1) | (39,513 | ) | (1,570,975 | ) | ||||
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Net increase (decrease) | 956,473 | $ | 42,109,505 | |||||
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Investor Class | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 119,628 | $ | 5,041,881 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 230,335 | 9,270,981 | ||||||
Shares redeemed | (195,259 | ) | (8,227,153 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | 154,704 | 6,085,709 | ||||||
Shares converted into Investor Class (See Note 1) | 113,705 | 4,789,103 | ||||||
Shares converted from Investor Class (See Note 1) | (482,609 | ) | (20,465,858 | ) | ||||
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Net increase (decrease) | (214,200 | ) | $ | (9,591,046 | ) | |||
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Year ended October 31, 2017: | ||||||||
Shares sold | 191,132 | $ | 7,592,444 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 84,356 | 3,084,072 | ||||||
Shares redeemed | (373,260 | ) | (14,795,519 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | (97,772 | ) | (4,119,003 | ) | ||||
Shares converted into Investor Class (See Note 1) | 185,596 | 7,378,715 | ||||||
Shares converted from Investor Class (See Note 1) | (1,904,446 | ) | (80,010,269 | ) | ||||
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Net increase (decrease) | (1,816,622 | ) | $ | (76,750,557 | ) | |||
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28 | MainStay MAP Equity Fund |
Class B | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 17,896 | $ | 674,738 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 108,629 | 3,908,458 | ||||||
Shares redeemed | (155,747 | ) | (5,848,176 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | (29,222 | ) | (1,264,980 | ) | ||||
Shares converted from Class B (See Note 1) | (152,395 | ) | (5,730,073 | ) | ||||
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| |||||
Net increase (decrease) | (181,617 | ) | $ | (6,995,053 | ) | |||
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Year ended October 31, 2017: | ||||||||
Shares sold | 50,433 | $ | 1,761,431 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 19,649 | 652,938 | ||||||
Shares redeemed | (206,700 | ) | (7,409,918 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | (136,618 | ) | (4,995,549 | ) | ||||
Shares converted from Class B (See Note 1) | (218,348 | ) | (7,877,051 | ) | ||||
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Net increase (decrease) | (354,966 | ) | $ | (12,872,600 | ) | |||
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Class C | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 59,753 | $ | 2,248,778 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 229,749 | 8,266,357 | ||||||
Shares redeemed | (522,638 | ) | (19,740,133 | ) | ||||
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Net increase (decrease) | (233,136 | ) | $ | (9,224,998 | ) | |||
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Year ended October 31, 2017: | ||||||||
Shares sold | 87,352 | $ | 3,096,595 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 36,839 | 1,224,153 | ||||||
Shares redeemed | (955,543 | ) | (34,349,965 | ) | ||||
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Net increase (decrease) | (831,352 | ) | $ | (30,029,217 | ) | |||
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Class I | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 788,856 | $ | 34,282,571 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,515,623 | 62,761,957 | ||||||
Shares redeemed | (5,002,025 | ) | (219,135,881 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | (2,697,546 | ) | (122,091,353 | ) | ||||
Shares converted into Class I (See Note 1) | 253 | 11,027 | ||||||
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Net increase (decrease) | (2,697,293 | ) | $ | (122,080,326 | ) | |||
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Year ended October 31, 2017: | ||||||||
Shares sold | 1,079,409 | $ | 43,953,110 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 491,140 | 18,427,571 | ||||||
Shares redeemed | (9,358,125 | ) | (382,926,753 | ) | ||||
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Net increase (decrease) in shares outstanding before conversion | (7,787,576 | ) | (320,546,072 | ) | ||||
Shares converted into Class I (See Note 1) | 12,366 | 504,147 | ||||||
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| |||||
Net increase (decrease) | (7,775,210 | ) | $ | (320,041,925 | ) | |||
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Class R1 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 4,042 | $ | 173,227 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 8,414 | 340,769 | ||||||
Shares redeemed | (84,525 | ) | (3,620,010 | ) | ||||
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Net increase (decrease) | (72,069 | ) | $ | (3,106,014 | ) | |||
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Year ended October 31, 2017: | ||||||||
Shares sold | 12,345 | $ | 494,197 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 1,741 | 64,018 | ||||||
Shares redeemed | (10,423 | ) | (415,386 | ) | ||||
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Net increase (decrease) | 3,663 | $ | 142,829 | |||||
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Class R2 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 4,106 | $ | 173,691 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 6,319 | 255,592 | ||||||
Shares redeemed | (47,936 | ) | (2,120,017 | ) | ||||
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| |||||
Net increase (decrease) | (37,511 | ) | $ | (1,690,734 | ) | |||
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| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 9,745 | $ | 386,926 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,062 | 75,772 | ||||||
Shares redeemed | (50,883 | ) | (2,025,153 | ) | ||||
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| |||||
Net increase (decrease) | (39,076 | ) | $ | (1,562,455 | ) | |||
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Class R3 | Shares | Amount | ||||||
Year ended October 31, 2018: | ||||||||
Shares sold | 38,554 | $ | 1,637,364 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 2,385 | 96,153 | ||||||
Shares redeemed | (16,984 | ) | (723,058 | ) | ||||
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| |||||
Net increase (decrease) | 23,955 | $ | 1,010,459 | |||||
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|
| |||||
Year ended October 31, 2017: | ||||||||
Shares sold | 4,617 | $ | 182,618 | |||||
Shares issued to shareholders in reinvestment of dividends and distributions | 448 | 16,394 | ||||||
Shares redeemed | (4,576 | ) | (182,014 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 489 | $ | 16,998 | |||||
|
|
|
|
Note 10–Subsequent Events
In connection with the preparation of the financial statements of the Fund as of and for the year ended October 31, 2018, events and transactions subsequent to October 31, 2018, through the date the financial statements were issued have been evaluated by the Fund’s management for possible adjustment and/or disclosure. No subsequent events requiring financial statement adjustment or disclosure have been identified.
29 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
The MainStay Funds:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MainStay MAP Equity Fund (the Fund), one of the funds constituting The MainStay Funds, including the portfolio of investments, as of October 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of October 31, 2018, by correspondence with custodians, the transfer agent, and brokers or by other appropriate auditing procedures when replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more New York Life Investment Management investment companies since 2003.
Philadelphia, Pennsylvania
December 21, 2018
30 | MainStay MAP Equity Fund |
Federal Income Tax Information
(Unaudited)
The Fund is required under the Internal Revenue Code to advise shareholders in a written statement as to the federal tax status of dividends paid by the Fund during such fiscal years. Accordingly, the Fund paid $102,330,537 as long term capital gain distributions.
For the fiscal year ended October 31, 2018, the Fund designated approximately $15,371,103 under the Internal Revenue Code as qualified dividend income eligible for reduced tax rates.
The dividends paid by the Fund during the fiscal year ended October 31, 2018 should be multiplied by 61.36% to arrive at the amount eligible for the corporate dividend-received deduction.
In February 2019, shareholders will receive an IRS Form 1099-DIV or substitute Form 1099, which will show the federal tax status of the distributions received by shareholders in calendar year 2018. The amounts that will be reported on such 1099-DIV or substitute Form 1099 will be the amounts you are to use on your federal income tax return and will differ from the amounts which we must report for the Fund’s fiscal year end October 31, 2018.
Proxy Voting Policies and Procedures and Proxy Voting Record
A description of the policies and procedures that New York Life Investments uses to vote proxies related to the Fund’s securities is available without charge, upon request, by visiting the MainStay Funds’ website at nylinvestments.com/funds or on the SEC’s website at www.sec.gov.
The Fund is required to file with the SEC its proxy voting records for the 12-month period ending June 30 on Form N-PX. The most recent Form N-PX or proxy voting record is available free of charge upon request by calling 800-MAINSTAY (624-6782); visiting the MainStay Funds’ website at nylinvestments.com/funds; or on the SEC’s website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. The Fund’s Form N-Q is available without charge, on the SEC’s website at www.sec.gov or by calling New York Life Investments at 800-MAINSTAY (624-6782).
31 |
Board of Trustees and Officers (Unaudited)
The Trustees and officers of the Funds are listed below. The Board oversees the MainStay Group of Funds (which consists of MainStay Funds and MainStay Funds Trust), MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund, the Manager and the Subadvisors, and elects the officers of the Funds who are responsible for the day-to-day operations of the Funds. Information pertaining to the Trustees and officers is set forth below. Each Trustee serves until his or her successor is elected and qualified or until his or her resignation, death or removal. Under the Board’s retirement policy, unless an exception is made, a Trustee must tender his or her
resignation by the end of the calendar year during which he or she reaches the age of 75. Mr. Meenan reached the age of 75 during the calendar year 2016, and his term was extended for one additional year through the end of calendar year 2017. Mr. Meenan retired at the end of calendar year 2017. Officers are elected annually by the Board. The business address of each Trustee and officer listed below is 51 Madison Avenue, New York, New York 10010. A majority of the Trustees are not “interested persons” (as defined by the 1940 Act and rules adopted by the SEC thereunder) of the Fund (“Independent Trustees”).
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Interested Trustee | Yie-Hsin Hung* 8/12/62 | MainStay Funds: Trustee since 2017; MainStay Funds Trust: Trustee since 2017. | Senior Vice President of New York Life since joining in 2010, Member of the Executive Management Committee since 2017, Chief Executive Officer, New York Life Investment Management Holdings LLC & New York Life Investment Management LLC since 2015. Senior Managing Director and Co-President of New York Life Investment Management LLC from January 2014 to May 2015. Previously held positions of increasing responsibility, including head of NYLIM International, Alternative Growth Businesses, and Institutional investments since joining New York Life in 2010. | 83 | MainStay VP Funds Trust: Trustee since 2017 (33 portfolios); and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2017. |
* | This Trustee is considered to be an “interested person” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay DefinedTerm Municipal Opportunities Fund, within the meaning of the 1940 Act because of her affiliation with New York Life Insurance Company, New York Life Investment Management LLC, Candriam Belgium S.A., Candriam France S.A.S., IndexIQ Advisors LLC, MacKay Shields LLC, NYL Investors LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail above in the column entitled “Principal Occupation(s) During Past Five Years.” |
32 | MainStay MAP Equity Fund |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | David H. Chow 12/29/57 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Founder and CEO, DanCourt Management, LLC (since 1999) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Market Vectors Group of Exchange-Traded Funds: Independent Chairman of the Board of Trustees since 2008 and Trustee since 2006 (57 portfolios); and Berea College of Kentucky: Trustee since 2009. | |||||||
Susan B. Kerley 8/12/51 | MainStay Funds: Chairman since 2017 and Trustee since 2007; MainStay Funds Trust: Chairman since 2017 and Trustee since 1990.** | President, Strategic Management Advisors LLC (since 1990) | 83 | MainStay VP Funds Trust: Chairman since January 2017 and Trustee since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Chairman since 2017 and Trustee since 2011; and Legg Mason Partners Funds: Trustee since 1991 (54 portfolios). | ||||||||
Alan R. Latshaw 3/27/51 | MainStay Funds: Trustee and Audit Committee Financial Expert since 2006; MainStay Funds Trust: Trustee and Audit Committee Financial Expert since 2007.** | Retired; Partner, Ernst & Young LLP (2002 to 2003); Partner, Arthur Andersen LLP (1989 to 2002); Consultant to the MainStay Funds Audit and Compliance Committee (2004 to 2006) | 83 | MainStay VP Funds Trust: Trustee and Audit Committee Financial Expert since 2007 (33 portfolios)***; MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee and Audit Committee Financial Expert since 2011; State Farm Associates Funds Trusts: Trustee since 2005 (4 portfolios); State Farm Mutual Fund Trust: Trustee since 2005 (15 portfolios); and State Farm Variable Product Trust: Trustee since 2005 (9 portfolios). | ||||||||
Peter Meenan**** 12/5/41 | The MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2002.** | Retired; Independent Consultant (2004 to 2013); President and Chief Executive Officer, Babson—United, Inc. (financial services firm) (2000 to 2004); Independent Consultant (1999 to 2000); Head of Global Funds, Citicorp (1995 to 1999) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. | ||||||||
Richard H. Nolan, Jr. 11/16/46 | MainStay Funds: Trustee since 2007; MainStay Funds Trust: Trustee since 2007.** | Managing Director, ICC Capital Management (since 2004); President—Shields/Alliance, Alliance Capital Management (1994 to 2004) | 83 | MainStay VP Funds Trust: Trustee since 2006 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
33 |
Name and Date of Birth | Term of Office, Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee | ||||||||
Independent Trustees | Jacques P. Perold 5/12/58 | MainStay Funds: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); MainStay Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015). | Retired; President, Fidelity Management & Research Company (2009 to 2014); Founder, President and Chief Executive Officer, Geode Capital Management, LCC (2001 to 2009) | 83 | MainStay VP Funds Trust: Trustee since 2016, Advisory Board Member (June 2015 to December 2015) (33 portfolios); MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2016, Advisory Board Member (June 2015 to December 2015); Allstate Corporation: Director since 2015; MSCI, Inc.: Director since 2017 and Boston University: Trustee since 2014. | |||||||
Richard S. Trutanic 2/13/52 | MainStay Funds: Trustee since 1994; MainStay Funds Trust: Trustee since 2007.** | Chairman and Chief Executive Officer, Somerset & Company (financial advisory firm) (since 2004); Managing Director, The Carlyle Group (private investment firm) (2002 to 2004); Senior Managing Director, Partner and Board Member, Groupe Arnault S.A. (private investment firm) (1999 to 2002) | 83 | MainStay VP Funds Trust: Trustee since 2007 (33 portfolios)***; and MainStay MacKay DefinedTerm Municipal Opportunities Fund: Trustee since 2011. |
** | Includes prior service as a Director/Trustee of certain predecessor entities to MainStay Funds Trust. |
*** | Includes prior service as a Director of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
**** | Pursuant to the Retirement Policy. Mr. Meenan retired from the Board effective December 31, 2017. |
34 | MainStay MAP Equity Fund |
Name and Date of Birth | Position(s) Held and Length of Service | Principal Occupation(s) During Past Five Years | ||||||
Officers | Kirk C. Lehneis 6/29/74 | President, MainStay Funds, MainStay Funds Trust (since 2017) | Chief Operating Officer and Senior Managing Director (since 2016), New York Life Investment Management LLC; Chairman of the Board (since 2017), NYLIFE Distributors LLC; Chairman of the Board, NYLIM Service Company LLC (since 2017); Trustee, President and Principal Executive Officer of IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since January 2018); President, MainStay MacKay DefinedTerm Municipal Opportunities Fund and MainStay VP Funds Trust (since 2017)**; Senior Managing Director, Global Product Development (From 2015—2016); Managing Director, Product Development (From 2010—2015), New York Life Investment Management LLC | |||||
Jack R. Benintende 5/12/64 | Treasurer and Principal Financial and Accounting Officer, MainStay Funds (since 2007), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (since 2007); Treasurer and Principal Financial and Accounting Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2007)**; and Assistant Treasurer, New York Life Investment Management Holdings LLC (2008 to 2012) | ||||||
Kevin M. Bopp 2/24/69 | Vice President and Chief Compliance Officer, MainStay Funds and MainStay Funds Trust (since 2014) | Chief Compliance Officer, New York Life Investment Management LLC, IndexIQ Trust, IndexIQ ETF Trust and IndexIQ Active ETF Trust (since 2016), Director and Associate General Counsel (2011 to 2014) and Vice President and Assistant General Counsel (2010 to 2011), New York Life Investment Management LLC; Vice President and Chief Compliance Officer, MainStay VP Funds Trust, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2014); Assistant Secretary, MainStay Funds, MainStay Funds Trust and MainStay VP Funds Trust (2010 to 2014)**, MainStay MacKay DefinedTerm Municipal Opportunities Fund (2011 to 2014) | ||||||
J. Kevin Gao 10/13/67 | Secretary and Chief Legal Officer, MainStay Funds and MainStay Funds Trust (since 2010) | Managing Director and Associate General Counsel, New York Life Investment Management LLC (since 2010); Secretary and Chief Legal Officer, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2010)** | ||||||
Scott T. Harrington 2/8/59 | Vice President—Administration, MainStay Funds (since 2005), MainStay Funds Trust (since 2009) | Managing Director, New York Life Investment Management LLC (including predecessor advisory organizations) (since 2000); Member of the Board of Directors, New York Life Trust Company (since 2009); Vice President—Administration, MainStay MacKay DefinedTerm Municipal Opportunities Fund (since 2011) and MainStay VP Funds Trust (since 2005)** |
* | The officers listed above are considered to be “interested persons” of the MainStay Group of Funds, MainStay VP Funds Trust and MainStay MacKay Defined Term Municipal Opportunities Fund within the meaning of the 1940 Act because of their affiliation with the MainStay Group of Funds, New York Life Insurance Company and/or its affiliates, including New York Life Investment Management LLC, NYLIM Service Company LLC, NYLIFE Securities LLC and/or NYLIFE Distributors LLC, as described in detail in the column captioned “Principal Occupation(s) During Past Five Years.” Officers are elected annually by the Board. |
** | Includes prior service as an Officer of MainStay VP Series Fund, Inc., the predecessor to MainStay VP Funds Trust. |
35 |
MainStay Funds
Equity
U.S. Equity
MainStay Epoch U.S. All Cap Fund
MainStay Epoch U.S. Equity Yield Fund
MainStay Epoch U.S. Small Cap Fund
MainStay Large Cap Growth Fund
MainStay MacKay Common Stock Fund
MainStay MacKay Growth Fund
MainStay MacKay S&P 500 Index Fund
MainStay MacKay U.S. Equity Opportunities Fund
MainStay MAP Equity Fund
International Equity
MainStay Epoch International Choice Fund
MainStay MacKay International Equity Fund
MainStay MacKay International Opportunities Fund
Emerging Markets Equity
MainStay Candriam Emerging Markets Equity Fund
MainStay MacKay Emerging Markets Equity Fund
Global Equity
MainStay Epoch Capital Growth Fund
MainStay Epoch Global Choice Fund
MainStay Epoch Global Equity Yield Fund
Fixed Income
Taxable Income
MainStay Floating Rate Fund
MainStay Indexed Bond Fund
MainStay MacKay Emerging Markets Debt Fund
MainStay MacKay Government Fund
MainStay MacKay High Yield Corporate Bond Fund
MainStay MacKay Short Duration High Yield Fund
MainStay MacKay Total Return Bond Fund
MainStay MacKay Unconstrained Bond Fund
Tax-Exempt Income
MainStay MacKay California Tax Free Opportunities Fund1
MainStay MacKay High Yield Municipal Bond Fund
MainStay MacKay New York Tax Free Opportunities Fund2
MainStay MacKay Short Term Municipal Fund3
MainStay MacKay Tax Free Bond Fund
Money Market
MainStay Money Market Fund
Mixed Asset
MainStay Absolute Return Multi-Strategy Fund4
MainStay Balanced Fund
MainStay Income Builder Fund
MainStay MacKay Convertible Fund
Speciality
MainStay Cushing Energy Income Fund
MainStay Cushing MLP Premier Fund
MainStay Cushing Renaissance Advantage Fund
Asset Allocation/Target Date
MainStay Conservative Allocation Fund
MainStay Growth Allocation Fund
MainStay Moderate Allocation Fund
MainStay Moderate Growth Allocation Fund
MainStay Retirement 2010 Fund
MainStay Retirement 2020 Fund
MainStay Retirement 2030 Fund
MainStay Retirement 2040 Fund
MainStay Retirement 2050 Fund
MainStay Retirement 2060 Fund
Manager
New York Life Investment Management LLC
New York, New York
Subadvisors
Candriam Belgium S.A.5
Brussels, Belgium
Candriam France S.A.S.5
Paris, France
Cushing Asset Management, LP
Dallas, Texas
Epoch Investment Partners, Inc.
New York, New York
MacKay Shields LLC5
New York, New York
Markston International LLC
White Plains, New York
NYL Investors LLC5
New York, New York
Winslow Capital Management, LLC
Minneapolis, Minnesota
Legal Counsel
Dechert LLP
Washington, District of Columbia
Independent Registered Public Accounting Firm
KPMG LLP
Philadelphia, Pennsylvania
1. | Class A and Class I shares of this Fund are registered for sale in AZ, CA, MI, NV, OR, TX, UT and WA. Class I shares are registered for sale in CO, FL, GA, HI, ID, MA, MD, NH, NJ and NY. |
2. This Fund is registered for sale in CA, CT, DE, FL, MA, NJ, NY and VT.
3. Formerly known as MainStay MacKay Tax Advantaged Short Term Bond Fund.
4. This Fund was liquidated on November 30, 2018.
5. An affiliate of New York Life Investment Management LLC.
Not part of the Annual Report
For more information
800-MAINSTAY (624-6782)
nylinvestments.com/funds
New York Life Investments is a service mark and name under which New York Life Investment Management LLC does business. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.
©2018 NYLIFE Distributors LLC. All rights reserved.
1717394 MS293-18 | MSMP11-12/18 (NYLIM) NL220 |
Item 2. | Code of Ethics. |
As of the end of the period covered by this report, the Registrant has adopted a code of ethics (the “Code”) that applies to the Registrant’s principal executive officer (“PEO”) and principal financial officer (“PFO”). A copy of the Code is filed herewith. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PEO or PFO during the period covered by this report.
Item 3. | Audit Committee Financial Expert. |
The Board of Trustees has determined that the Registrant has three audit committee financial experts serving on its Audit Committee. The Audit Committee financial experts are Alan R. Latshaw, David H. Chow and Susan B. Kerley. Mr. Latshaw, Mr. Chow and Ms. Kerley are “independent” within the meaning of that term under the Investment Company Act of 1940.
Item 4. | Principal Accountant Fees and Services. |
(a) | Audit Fees |
The aggregate fees billed for the fiscal year ended October 31, 2018 for professional services rendered by KPMG for the audit of the Registrant’s annual financial statements or services that are normally provided by KPMG in connection with statutory and regulatory filings or engagements for that fiscal year were $757,200.
The aggregate fees billed for the fiscal year ended October 31, 2017 for professional services rendered by KPMG LLP (“KPMG”) for the audit of the Registrant’s annual financial statements or services that are normally provided by KPMG in connection with statutory and regulatory filings or engagements for that fiscal year were $739,900.
(b) | Audit-Related Fees |
The aggregate fees billed for assurance and related services by KPMG that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were: (i) $0 for the fiscal year ended October 31, 2018, and (ii) $2,500 for the fiscal year ended October 31, 2017. These audit-related services include review of financial highlights for Registrant’s registration statements and issuance of consents to use the auditor’s reports.
(c) | Tax Fees |
The aggregate fees billed for professional services rendered by KPMG for tax compliance, tax advice, and tax planning were: (i) $0 during the fiscal year ended October 31, 2018, and (ii) $0 during the fiscal year ended October 31, 2017. These services primarily included preparation of federal, state and local income tax returns and excise tax returns, as well as services relating to excise tax distribution requirements.
(d) | All Other Fees |
The aggregate fees billed for products and services provided by KPMG, other than the services reported in paragraphs (a) through (c) of this Item were: (i) $0 during the fiscal year ended October 31, 2018, and (ii) $0 during the fiscal year ended October 31, 2017.
(e) | Pre-Approval Policies and Procedures |
(1) | The Registrant’s Audit and Compliance Committee has adopted pre-approval policies and procedures (the “Procedures”) to govern the Committee’s pre-approval of (i) all audit services and permissible non-audit services to be provided to the Registrant by its independent accountant, and (ii) all permissible non-audit services to be provided by such independent accountant to the Registrant’s investment adviser and to any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant (collectively, the “Service Affiliates”) if the services directly relate to the Registrant’s operations and financial reporting. In accordance with the Procedures, the Audit and Compliance Committee is responsible for the engagement of the independent accountant to certify the Registrant’s financial statements for each fiscal year. With respect to the pre-approval of non-audit services provided to the Registrant and its Service Affiliates, the Procedures provide that the Audit and Compliance Committee may annually pre-approve a list of the types of services that may be provided to the Registrant or its Service Affiliates, or the Audit and Compliance Committee may pre-approve such services on a project-by-project basis as they arise. Unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit and Compliance Committee if it is to be provided by the independent accountant. The Procedures also permit the Audit and Compliance Committee to delegate authority to one or more of its members to pre-approve any proposed non-audit services that have not been previously pre-approved by the Audit and Compliance Committee, subject to the ratification by the full Audit and Compliance Committee no later than its next scheduled meeting. To date, the Audit and Compliance Committee has not delegated such authority. |
(2) | With respect to the services described in paragraphs (b) through (d) of this Item 4, no amount was approved by the Audit and Compliance Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
(f) There were no hours expended on KPMG’s engagement to audit the Registrant’s financial statements for the most recent fiscal year attributable to work performed by persons other than KPMG’s full-time, permanent employees.
(g) All non-audit fees billed by KPMG for services rendered to the Registrant for the fiscal years ended October 31, 2018 and October 31, 2017 are disclosed in 4(b)-(d) above.
The aggregate non-audit fees billed by KPMG for services rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant were approximately: (i) $0 for the fiscal year ended October 31, 2018, and (ii) $0 for the fiscal year ended October 31, 2017.
(h) The Registrant’s Audit and Compliance Committee has determined that the non-audit services rendered by KPMG for the fiscal year ended October 31, 2018 to the Registrant’s investment adviser and any entity controlling, controlled by, or under common control with the Registrant’s investment adviser
that provides ongoing services to the Registrant that were not required to be pre-approved by the Audit and Compliance Committee because they did not relate directly to the operations and financial reporting of the registrant were compatible with maintaining the respective independence of KPMG during the relevant time period.
Item 5. | Audit Committee of Listed Registrants |
Not applicable.
Item 6. | Schedule of Investments |
The Schedule of Investments is included as part of Item 1 of this report.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not Applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
Since the Registrant’s last response to this Item, there have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees.
Item 11. | Controls and Procedures. |
(a) Based on an evaluation of the Registrant’s Disclosure Controls and Procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) (the “Disclosure Controls”), as of a date within 90 days prior to the filing date (the “Filing Date”) of this Form N-CSR (the “Report”), the Registrant’s principal executive officer and principal financial officer have concluded that the Disclosure Controls are reasonably designed to ensure that information required to be disclosed by the Registrant in the Report is recorded, processed, summarized and reported by the Filing Date, including ensuring that information required to be disclosed in the Report is accumulated and communicated to the Registrant’s management, including the Registrant’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d)) under the Investment Company Act of 1940 that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. | Exhibits. |
(a)(1) | Code of Ethics | |
(a)(2) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2 under the Investment Company Act of 1940. | |
(b) | Certifications of principal executive officer and principal financial officer as required by Section 906 of the Sarbanes-Oxley Act of 2002. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE MAINSTAY FUNDS | ||
By: | /s/ Kirk C. Lehneis | |
Kirk C. Lehneis | ||
President and Principal Executive Officer | ||
Date: January 4, 2019 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: | /s/ Kirk C. Lehneis | |
Kirk C. Lehneis | ||
President and Principal Executive Officer | ||
Date: January 4, 2019 | ||
By: | /s/ Jack R. Benintende | |
Jack R. Benintende | ||
Treasurer and Principal Financial | ||
and Accounting Officer | ||
Date: January 4, 2019 |
EXHIBIT INDEX
(a)(1) | Code of Ethics | |
(a)(2) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2 under the Investment Company Act of 1940. | |
(b) | Certification of principal executive officer and principal financial officer as required by Section 906 of the Sarbanes-Oxley Act of 2002. |